It is now personal income taxpayers’ turn to get relief from the rigours of taxation. About 4 million income taxpayers, who were to get extra tax demands for their FY17 income due to discrepancies in their tax returns, will now be spared. They will also get any tax refunds due for the year over the next few weeks. 

Quick processing of their tax returns without proposing any adjustments to their taxable income on the basis of information from employers, banks and financial institutions has been initiated after the Central Board of Direct Taxes (CBDT) earlier this month relaxed a rule on verification of reported income, a tax official said, on the condition of anonymity.

Thus, these assessees will not face an extra tax demand even if the income reported in the return is less than what has been declared by the employer or the financial institutions managing their savings. These institutions, which deduct tax at source, state details of the assessee’s income in Forms 16, 16A and 26AS.

As per CBDT’s instruction to officials on 11 October, a process to adjust the taxable income will be initiated only in cases where a source of income, say salary, interest income or income from house property, has altogether been omitted in the tax return, explained the official. 

The move benefits over 11% of the 35 million personal income tax return filers, who had discrepancies in their returns for the financial year 2016-17. 

“We have to balance between the need for verifying information given in the return and the need for processing returns quickly,” said the official. The tax department has taken the call that even in cases where income reported by the tax payer is less than what the tax deducting institutions have stated, there are still chances of the assessees being honest and therefore they should be given the benefit of doubt.

“The clarification issued by CBDT is progressive as it will avoid issuing of millions of notices to individual assessee on account of mismatch of information filed in the return of income with that in the forms 16/16A/26AS as in a majority of cases the mismatch may be on account of net income reflected in the return of income against the gross income reflected in these forms,” 

The now relaxed requirement of adjusting the taxable income reported by the assessee by taking into account the statements of employers and other entities was introduced with effect from April this year through Finance Act of 2016. #casansaar (Source - LiveMint)