Income tax return (ITR) filing for the financial year 2023-24 (current assessment year) was opened in the first week of April. This is unlike past years when the tax filing utilities would typically be enabled by May.
The Central Board of Direct Taxes in a press release said this is for the first time in recent years that the taxpayers have been enabled to file tax returns on the first day of the new financial year and that this is a step towards ease of compliance and seamless taxpayer services.
However, chartered accountants are discouraging the early birds from filing ITR before June.
This is because tax deducted at source (TDS) reporting exercise by banks and other entities on interest income on fixed deposits and savings accounts finishes by 31 May. Similarly, employers start releasing Form16 of employees in the first week of June.
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“In the case of salaried individuals, all the information related to tax exemptions and deductions claimed and TDS gets captured in the fourth quarter return. The first three quarters only have salary related numbers,” said Prakash Hegde, chartered accountant, Acer Tax & Corporate Services.
Apart from this, statement of financial transactions (SFT), which captures high-value transactions related to credit cards, buying or selling bonds, shares or mutual funds and cash deposits, among other transactions, aggregating to over ₹10 lakh each also gets finalized by 31 May.
SFT, TDS and TCS data and details related to other incomes takes additional 10-15 days to reflect in Form 26AS and the Annual Information Statement (AIS). Hence, currently, AIS will not be up to date and taxpayers will end up filing ITR with incorrect information later.
“In most cases, ITR filed before 15 June will get a mismatch notice from the IT department,” said Karan Batra, a Delhi-based chartered accountant.
Even if a taxpayer with interest income has all documents and is confident about filing accurate information, they may still get a mismatch notice as the AIS will be outdated and that will create a discrepancy between the information provided in the ITR and that reflecting in the AIS currently.
Non-salaried individuals with no interest income and only capital gains can file an early ITR but only if they didn’t sell a capital asset in the last quarter of FY 2023 as it will most likely not reflect in AIS yet.
A mismatch notice doesn’t entail any penalty and rather creates the hassle of filing a revised return before the due date of 31 December. Hegde pointed that in some cases where the mismatch notice gets delayed and is sent after the due date, the taxpayer will have no option but to file an updated return that carries extra cost.
In an updated return, taxpayer has to pay additional tax of 25% of the aggregate of tax and applicable interest on the outstanding tax, if any.
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Those taxpayers who have a huge refund to claim can file their tax return early to get the refund early. Some cases in point are non-resident Indians (NRIs) who have to part with 30% TDS on sale of property or those taxpayers who bore a 20% TCS on remitting money outside India under the LRS. However, they should try to provide correct information and revisit the ITR later.
“These taxpayers should necessarily revisit the tax return and check the AIS once everything is updated. Taxpayers can revise their ITR before the deadline at no extra cost,” said Hegde.
Though taxpayers have until 31 July to file ITR, they should check the relevant ITR form in advance and prepare the required documents. Batra pointed out that he has created a draft ITR for his clients which he intends to finalize after 15 June after reconciling the information with updated Form 26AS and AIS. “This will help save the last minute rush in July,” he said.
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Hegde said by releasing forms early CBDT has indeed made compliance easier for taxpayers. “In my opinion, ITR forms should be released at the start of the financial year itself. Until last year when the forms would be released in May-June, the taxpayer would be in for surprises as some additional details would be asked which the taxpayer did not bother to document through the financial year as they were not aware. Early release of forms can ensure that the taxpayer maintains relevant documents through the financial year and doesn’t have to scramble at the time of ITR filing.”