Failed refunds, income tax queries… Things to check after filing returns

Refund failures
You may have got your income-tax refunds earlier, but this year might be a bit different. Many individuals have been complaining that they haven’t yet got their tax refunds as yet. They say they have got messages of refund failures even though the bank account hasn’t changed.

“There are many who are receiving refund failure error messages even though they have claimed refunds and received them in the same bank account last year,” says Paras Savla, partner at tax consultancy KPB & Associates.

This issue could be due to matters that are beyond the purview of the income tax department. “Those who received refunds in the same bank account last year are now receiving a refund failure notice stating PAN (permanent account number) is not linked (to the account). Probably failure to renew know your customer (KYC norms in bank accounts) too could lead to refund failure,” says Karan Batra, founder of CharteredClub.com.
Some simple steps may rectify this.

For one, verify that your bank account mentioned in the tax returns is correct. Also check whether your Aadhaar and PAN are linked to your bank account. Bank-linked KYC documentation too needs to be in place.

Also read: Link Aadhaar to PAN and or pay Rs 500-1000 penalty 

Taxes paid not being reflected
Aside from refund delays in some cases, the I-T authorities have also sent emails to some people asking why taxes haven’t yet been paid. Even some of those who have paid taxes have been receiving such mails, claim some chartered accountants to whom Moneycontrol spoke. These are not I-T notices but simple queries sent by email.

There is a lag of about two days between the tax payment done through the online tax payment portal and the same being reflected in your Form 26 AS, a consolidated statement of all taxes paid. But this assessment year, taxes that have been paid before filing the returns in July 2022 aren’t being reflected and individuals are being told to clear the tax dues.

“There are cases that have come to our notice where taxpayers have paid the self-assessment tax but the same isn’t getting reflected in the tax returns and they are being asked to pay the balance tax. When such an issue occurs, we send these returns for reprocessing,” says Batra.

Reconfirm investments
If you have wrongfully claimed deductions or rebates on investments, then too you are likely to receive an email to reconfirm whether the investment amount mentioned in the returns is correct.

In one instance, Batra, says, “It was found that many fraudulent home loan tax deductions were being claimed from one commercial building. Upon further investigation, it was also rumoured that many falsified Section 80C investment deductions were observed. To make sure this doesn’t recur, an email to reconfirm whether your investments claimed for deduction are accurate is being sent.”

Moneycontrol couldn’t independently verify this claim.

To be sure, this needn’t mean an active investigation by the income tax authorities. The tax department has, over the years, deployed artificial intelligence to spot any unusual or out-of-turn deductions or rebates or benefits being claimed that the taxpayer wouldn’t have claimed earlier.

In simple words, if the return filed in a particular year does not fit the patterns set by the same taxpayer in earlier years, an automatic email goes off to the taxpayer, simply asking for more information. If, for instance, you have claimed very few investments under the Section 80C basket but now claim to have exhausted the entire Section 80C limit of Rs 1.5 lakh, you could get this mail.

The I-T authorities’ systems also sometimes notify taxpayers if they have claimed more deductions this year than in previous years.

“If you fail to present the relevant documents, then a tax evasion penalty of up to 300 percent could be levied and the assessing officer could initiate penalty proceedings,” Batra points out.

So check whether the relevant documents are in place and preserve them for at least three more years.

Disclose foreign assets
Individuals who have foreign assets are being sent notices. Either foreign travel information is being used or residential status being traced to unearth taxpayers evading taxes on foreign assets.

“If you were working abroad and had a bank account in the country earlier, or received employee stock options of internationally listed companies as you worked for a multinational company, then you would have to justify how you acquired these and why the same wasn’t mentioned in your tax return. Apart from capital gains during sale, even dividend income from these international equities would have to be declared under the Schedule for Assets and Liabilities,” says Sudhir Kaushik, co-founder of TaxSpanner.com.

What should taxpayers do?
Do not take any notices or emails from the tax department lightly. The mails may well be routine, but it’s best to settle the issues raised right away than ignore it.