Why You Received a Notice for Wrong Reporting by Your Employer — TaxBuddy’s Guide
- Rashmita Choudhary
- Nov 14, 2025
- 8 min read
Receiving a notice for wrong reporting by your employer usually means the Income Tax Department has detected a mismatch between the details reported by your employer and the information reflected in your Form 26AS, Form 16, or filed ITR. These discrepancies commonly arise from incorrect PAN reporting, TDS not deposited on time, salary details not matching payroll records, or errors in the employer’s TDS return. Such mismatches can trigger automated notices seeking clarification or correction. Platforms like TaxBuddy help taxpayers understand these discrepancies and handle employer-related notices with clarity and compliance support.
Table of Contents
Why Tax Notices Occur Due to Employer Reporting Errors
Employer-related reporting errors often trigger income tax notices because the tax system relies on accurate, synchronised data from multiple sources. Salary income, TDS deductions, and reported tax credits all flow from the employer’s filings, and any mismatch between these records and the taxpayer’s filed return creates discrepancies in the CPC system. A notice may arise when the salary credited by the employer doesn’t match payroll submissions, when TDS deducted doesn’t align with Form 26AS, or when inaccurate reporting in Form 24Q leads to incorrect tax entries under the employee’s PAN. These inconsistencies push the return into the “mismatch” category and prompt automated communication from the Income Tax Department seeking clarification.
Understanding TDS Mismatch and PAN-Related Issues
TDS mismatches typically result from an employer entering incorrect PAN data, deducting tax under the wrong section, or failing to deposit the TDS into the government account within prescribed timelines. When the employer’s TDS return carries an inaccurate PAN, the credit gets applied to the wrong taxpayer or remains uncredited. Similarly, if the employer delays deposit of TDS or files an incorrect TDS return, Form 26AS won’t reflect the deducted amount, leading the system to believe tax has not been paid. Such mismatches may trigger demands, even when the employee has legitimate pay slip proof. Verifying the PAN at the employer level during onboarding significantly reduces the probability of these errors.
Salary Reporting Errors by Employers and Their Impact
Salary reporting errors arise when employers misclassify allowances, exclude certain components, or inaccurately compute taxable salary while preparing annual filings. Even minor issues—rounding off errors, missing reimbursements, incorrect breakup of exemptions, or unreported perquisites—can cause the salary figures in Form 16 to diverge from what the ITR algorithm expects. When the system detects variations between income reported by the employer and income declared in the taxpayer’s return, a notice under Section 143(1) or a clarification request may follow. These inaccuracies can also affect deductions under Chapter VI-A, leading to taxable income discrepancies.
Form 16 vs Form 26AS Mismatch: Why It Triggers a Notice
A mismatch between Form 16 and Form 26AS is one of the most common first-level triggers for income tax notices. Form 16 summarises what the employer claims to have deducted and deposited as TDS, while Form 26AS represents what the government has actually received. If the employer reports a higher deduction in Form 16 but the deposited amount in Form 26AS is lower, the return automatically flags underreported tax payment. Similarly, incorrect quarterly filings in Form 24Q may not align with the annual Form 16. Even the smallest inconsistencies can lead to notices because CPC relies heavily on 26AS for validating TDS claims.
Incorrect or Delayed TDS Return Filing by Employers
Even when an employer deducts TDS accurately, delayed or incorrect filing of TDS returns can cause mismatches. Quarterly returns that contain missing entries, incorrect challan details, or delays in submission push the reflected TDS to appear late in Form 26AS. This delay creates temporary mismatches that become visible if the taxpayer files the return before the employer updates the data. When the system detects missing or incorrect challan mapping, automated notices may be issued even though the taxpayer has no involvement in the compliance lapse. The root cause lies entirely on the employer’s end, but the notice is sent to the individual because the return contains mismatched tax credits.
How to Verify Discrepancies Before Filing ITR
Cross-verifying multiple documents before filing is essential to avoid employer-related tax notices. This verification includes matching Form 16 with Form 26AS, reviewing the AIS/TIS for any additional salary entries, checking whether the TDS deduction dates match payroll cycles, and confirming that all allowances and reimbursements are accurately reflected. Comparing payroll summaries, payslips, and the income section in Form 16 helps identify inconsistencies early. If differences appear, the employee must request corrections from the employer in TDS returns or Form 16 issuance before uploading the ITR. Careful reconciliation significantly lowers the likelihood of receiving mismatch-based notices later.
How to Respond to a Notice for Wrong Reporting by Employer
Responding requires presenting documentation that supports the income and TDS entries declared in the return. This includes payslips, Form 16, bank statements reflecting salary credit, and communication proving employer deduction of tax. The response should clarify that the discrepancy originates from employer-side errors and request the department to allow time for the employer to correct the TDS return. In cases of non-deposit of TDS, the department often directs the employer to update records. The employee is generally not penalised if tax has indeed been deducted from salary. Using a compliance platform such as TaxBuddy helps prepare structured, accurate replies and ensures the notice is resolved efficiently.
How TaxBuddy Helps Resolve Employer-Related Reporting Notices
TaxBuddy offers structured support for taxpayers dealing with reporting errors originating from employers. The platform analyses Form 16, Form 26AS, AIS, and ITR entries to pinpoint exactly where the mismatch occurs. Employees often struggle to interpret notices, especially when employer filings contain technical issues; TaxBuddy’s system highlights the discrepancy and helps draft replies that align with the department’s expectations. In cases where the employer must file a correction, TaxBuddy guides the employee on the necessary communication. This reduces response timelines and creates clarity in situations where the taxpayer is not at fault but still receives a notice.
Conclusion
Employer-side reporting mistakes continue to be a major cause of tax notices, primarily because the Income Tax Department relies on synchronized data across multiple reporting systems. Identifying mismatches early and responding with proper documentation ensures smoother resolution. For seamless support throughout the compliance process, download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy provides a flexible filing ecosystem designed for all types of taxpayers. Those with straightforward income can use the self-filing option, which includes automated validations, prefilled data assistance, and error checks. Individuals with multiple income sources, employer-related reporting issues, capital gains, or complex deductions can opt for expert-assisted filing, where trained tax professionals prepare and review the return end-to-end. Both modes integrate the same AI-driven error detection system, ensuring accuracy whether the return is self-prepared or handled by an expert.
Q. Which is the best site to file ITR? The best platform depends on the complexity of the taxpayer’s profile. The government’s e-filing portal works well for simple returns but may feel overwhelming when dealing with notices, mismatches, or multiple income heads. Platforms like TaxBuddy offer a more guided experience through AI-backed checks, real-time mismatch alerts, and assistance for employer-related discrepancies. This makes them a preferred choice for salaried individuals, freelancers, investors, and anyone who wants additional support beyond basic tax filing.
Q. Where to file an income tax return? An income tax return can be filed directly on the official e-filing portal or through private platforms that simplify the process. The government portal remains the primary filing destination, but many taxpayers choose platforms that offer personalization, automated validations, and expert support. TaxBuddy connects seamlessly with the Income Tax Department’s systems while offering additional tools that help identify errors before uploading the return.
Q. Why did I receive a tax notice for TDS mismatch even though my employer deducted tax? A notice may be issued when the employer deducts TDS but does not deposit it with the government or files incorrect TDS returns. In such cases, Form 26AS will not show the credited TDS, even though payslips reflect deductions. The income tax system treats missing TDS entries as underreported tax and generates an automated notice. The issue arises from employer-side non-compliance, but clarification must still be submitted by the taxpayer through supporting documents.
Q. What should be done if the employer has not deposited TDS with the government? The matter should be raised with HR or the employer’s accounts team, as the responsibility to deposit TDS lies entirely with the employer under the Income Tax Act. The employee should collect salary slips and Form 16 as proof that TDS was deducted. A response must be submitted to the notice explaining the situation, along with supporting documents. Once the employer corrects the deposit or updates the TDS return, the mismatch usually resolves.
Q. How can Form 16 be checked against the Income Tax Department’s records? Verification involves a line-by-line comparison between Form 16, Form 26AS, AIS, and TIS. The TDS entries, deduction dates, gross salary, allowances, and taxable components must match across documents. Differences in TDS amounts, section codes, or salary breakup indicate inconsistencies in the employer’s reporting. Identifying these mismatches early prevents system-generated notices later.
Q. Can TaxBuddy assist in resolving a notice for wrong reporting by an employer? Yes. TaxBuddy analyses all salary records, TDS entries, and employer filings to identify the exact point of mismatch. It helps draft the correct response format, attach supporting documents, and guide the taxpayer on communicating with the employer if a revised TDS return is needed. This makes the notice-handling process structured, accurate, and less stressful.
Q. How important is correct bank information for employer-side TDS accuracy? Correct bank details help ensure smooth salary credit and prevent errors in reimbursements and adjustments. Although TDS refunds are issued by the Income Tax Department directly, not by the employer, accurate banking information at the employer level supports overall payroll accuracy. This reduces the possibility of mismatches that indirectly affect ITR filing.
Q. Can an employee face penalties for employer-side reporting mistakes? The employee is not penalised when the employer is responsible for the error. The Income Tax Department typically holds the employer accountable for incorrect TDS reporting, non-deposit of tax, or PAN mismatches. However, the employee still receives the notice because the return reflects incomplete or mismatched data. Submitting the correct explanation and documentation ensures the matter is closed without penalty.
Q. What happens when Form 16 shows correct TDS but Form 26AS does not? This happens when the employer either delays TDS filing or submits incorrect challan details. Form 26AS relies entirely on what the employer uploads through the TDS return. If the employer’s quarterly filing is pending or inaccurate, the credit will not appear in 26AS. The system interprets this as missing TDS and may issue a notice until the employer rectifies the return.
Q. How long does it take for corrected TDS returns to appear in Form 26AS? Once the employer files the corrected or revised TDS return, the update generally reflects in 26AS within 7 to 30 days. Processing time varies depending on the quarter, the timing of the correction, and the CPC’s update cycle. Taxpayers are advised to monitor 26AS periodically to confirm the update before responding to or closing the notice.
Q. Can incorrect reporting of salary components lead to scrutiny? Yes. Incorrect reporting of allowances, perquisites, reimbursements, and other salary components often triggers discrepancies between Form 16 and AIS/TIS. If the department notices inconsistencies, such as overreported exemptions or unreported perquisites, a clarification notice may be issued. Accurate employer-side reporting is essential because even minor classification errors can lead to scrutiny.
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