How to Handle Income Mismatch in ITR Filing

An income mismatch in ITR filing occurs when the income declared by a taxpayer does not align with the data available to the Income Tax Department through sources such as Form 16, Form 26AS, AIS, or TIS. Such discrepancies often trigger tax notices, revised return requirements, or delayed refunds. Identifying and resolving mismatches early can prevent penalties and ensure a smooth compliance experience.

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Table of Contents

• What is Income Mismatch in ITR Filing

• Common Causes of Income Mismatch

• How to Identify an Income Mismatch Before Filing

• Step-by-Step Process to Handle Income Mismatch in ITR

• Handling TDS and Tax Credit Mismatches

• Impact of Income Mismatch on Refunds and Notices

• Important Considerations and Best Practices

• Long-Tail Questions Related to Bank Account and Income Details

• How TaxBuddy Simplifies Income Mismatch Resolution

• Conclusion

• FAQs

What is Income Mismatch in ITR Filing

Income mismatch in Income Tax Return (ITR) filing occurs when the income declared by a taxpayer does not match the data available with the Income Tax Department. This data is usually collected from third-party sources such as employers (Form 16), banks (TDS/TCS records), mutual fund houses, or property transaction reports. The Income Tax Department uses advanced systems to cross-verify these sources through Form 26AS, Annual Information Statement (AIS), and Tax Information Summary (TIS). Any inconsistency between these figures and the reported income in the ITR triggers a mismatch. Such discrepancies can lead to scrutiny, demand notices, or delays in refund processing if not rectified promptly.

Common Causes of Income Mismatch

Several factors can cause income mismatches during ITR filing. One of the most common reasons is the omission of certain income sources such as savings account interest, fixed deposit interest, freelance income, or rental income. Filing the wrong ITR form or using inaccurate figures while entering income details can also create discrepancies. In some cases, employers or banks may make errors while filing TDS returns, leading to incorrect reflection of tax deducted in Form 26AS. Small rounding-off differences or data entry mistakes, though minor, can also result in mismatches. Additionally, taxpayers who have switched jobs during the year often forget to consolidate income from multiple employers, which contributes significantly to reporting errors.

How to Identify an Income Mismatch Before Filing

Before filing an ITR, taxpayers should proactively identify potential mismatches to avoid future complications. The Income Tax Department’s Compliance Portal provides an online facility to review any discrepancies between the taxpayer’s records and departmental data. It’s advisable to download and compare details from Form 26AS, AIS, and TIS, as these reflect all income and TDS information reported by third parties. AIS also includes data on dividend income, securities transactions, and high-value financial activities. Taxpayers using platforms like TaxBuddy can simplify this process — the platform automatically imports income data from these official sources, cross-verifies details, and flags mismatches in real time before the return is filed.

Step-by-Step Process to Handle Income Mismatch in ITR

Handling an income mismatch requires a structured approach. Start by collecting all relevant income proofs, such as Form 16 from employers, bank statements, interest certificates, rental receipts, and capital gains statements. Cross-verify these with AIS and Form 26AS to ensure every income source is included. If discrepancies are detected, use the Compliance Portal to check the exact nature of mismatch and rectify it accordingly. If an error has already been filed, submit a Revised ITR under Section 139(5) of the Income Tax Act, 1961. A revised return replaces the original one and must be filed before the end of the assessment year or before the assessment is completed. If a notice under Section 143(1) or 143(2) is issued due to mismatch, respond with accurate documentation supporting the corrected income. In cases where unreported income is identified later, the taxpayer may need to file an Updated Return (ITR-U) as per Section 139(8A). Filing accurately and within deadlines prevents penalties and preserves refund eligibility.

Handling TDS and Tax Credit Mismatches

A mismatch in TDS or tax credit details is another frequent issue. This typically arises when the deductor, such as an employer or bank, incorrectly mentions the PAN or fails to deposit the deducted tax on time. To resolve this, first verify the TDS amount in Form 26AS and AIS against your payslips or income records. If the mismatch is due to the deductor’s error, contact them and request correction through a revised TDS return. If it’s due to your reporting mistake, amend it by filing a Revised ITR. TaxBuddy’s system automatically matches TDS details with departmental data and alerts users if discrepancies are found, reducing the risk of notices and ensuring that eligible tax credits are claimed correctly.

Impact of Income Mismatch on Refunds and Notices

An uncorrected income mismatch can delay refund processing or even trigger scrutiny from the Income Tax Department. When income data in the ITR does not align with departmental records, the system may hold the refund until clarification or correction is provided. In some cases, a notice under Section 143(1) (intimation) or Section 143(2) (scrutiny) may be issued. If the mismatch is substantial, it can lead to reassessment proceedings or penalties for underreporting income. Responding promptly and filing a corrected ITR through the official portal helps resolve these issues efficiently. Regularly checking the AIS and TIS before filing minimizes such risks.

Important Considerations and Best Practices

Accurate income reporting is crucial to prevent mismatches. Always choose the correct ITR form that corresponds to your income type and sources. Maintain consistency between income reported in Form 16, bank statements, and investment records. Avoid underreporting or omitting any income, even if tax has already been deducted at source. Stay informed about CBDT notifications and any changes in reporting formats. It is also advisable to retain copies of all income proofs, as these may be required to respond to departmental queries. For taxpayers who prefer guided assistance, TaxBuddy offers expert-assisted filing options where professionals review all data before submission to ensure complete accuracy.

How TaxBuddy Simplifies Income Mismatch Resolution

TaxBuddy streamlines the entire mismatch resolution process through automated verification and expert guidance. The platform imports Form 26AS, AIS, and TIS data automatically and detects inconsistencies before filing. It flags potential mismatches, guides users to correct income entries, and assists in filing Revised ITRs where necessary. In addition to AI-based validation, TaxBuddy provides expert-assisted plans where tax professionals review the return for accuracy, ensuring compliance with the Income Tax Act. The mobile app enables users to track mismatch alerts, file corrections, and even respond to notices — all in one place. This approach saves time, minimizes errors, and ensures accurate reporting.

Conclusion

Handling income mismatch in ITR filing requires careful verification of all income sources and timely corrections when errors are identified. By using digital tools like the Compliance Portal and cross-verifying Form 26AS, AIS, and TIS, taxpayers can maintain transparency and avoid unnecessary scrutiny. Ensuring accuracy in reporting not only accelerates refund processing but also builds a clean compliance record. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.

FAQs

Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy provides both self-filing and expert-assisted ITR filing options to cater to different types of taxpayers. The self-filing plan is designed for individuals who are confident in managing their tax returns independently but want AI-driven error checks for accuracy. It automatically imports data from Form 16, Form 26AS, AIS, and TIS, ensuring all information is accurate before submission. The expert-assisted plan, on the other hand, connects users with qualified tax professionals who review every detail of the return, resolve mismatches, and ensure compliance with the Income Tax Act. This dual-model approach offers flexibility and peace of mind for all taxpayers.

Q2. Which is the best site to file ITR? The official Income Tax Department’s e-filing portal (https://www.incometax.gov.in) is the primary and most secure platform for filing ITRs in India. However, for a more user-friendly and guided experience, many taxpayers prefer third-party platforms like TaxBuddy. TaxBuddy’s AI-based system simplifies the entire process by automatically fetching financial data, checking for mismatches, and providing expert assistance when needed. It also ensures that all deductions, exemptions, and tax credits are claimed correctly, minimizing the chance of errors or notices.

Q3. Where to file an income tax return?

An income tax return can be filed online through the official Income Tax Department’s e-filing portal or via authorized third-party platforms such as TaxBuddy. The online process involves logging in with your PAN credentials, uploading Form 16 or other income documents, and verifying income details through AIS and Form 26AS. Once the data is validated, the ITR can be submitted electronically and e-verified through Aadhaar OTP, net banking, or digital signature. TaxBuddy offers both web and mobile app platforms, allowing taxpayers to complete the filing process conveniently in a few minutes.

Q4. What should I do if my income reported in Form 16 does not match my ITR? If the income shown in Form 16 differs from the amount reported in your ITR, review your Form 16 carefully and compare it with Form 26AS and AIS. The mismatch may occur due to missing income components like allowances, perquisites, or interest income not reported by the employer. In such cases, file a Revised ITR under Section 139(5) to correct the discrepancy. Ensure that all sources of income, including bank interest and additional employment income, are included in the revised filing. Timely correction prevents notices or reassessment by the tax department.

Q5. How to check if there is a tax credit mismatch in my filed ITR? A tax credit mismatch occurs when the TDS or TCS claimed in your ITR does not match the figures uploaded by deductors in Form 26AS or AIS. To check this, log in to the Income Tax portal and access the “Tax Credit Mismatch” feature or manually compare your ITR entries with Form 26AS and TIS. If the deductor has made an error while filing TDS returns, you can request them to file a correction statement. If the mismatch is due to your reporting error, it can be rectified by filing a Revised ITR. Platforms like TaxBuddy automatically flag tax credit mismatches before submission.

Q6. What happens if the Income Tax Department finds an unexplained income mismatch? If the Income Tax Department detects an income mismatch that cannot be explained or justified, it may issue an intimation under Section 143(1) or a notice under Section 143(2) for detailed scrutiny. The taxpayer is required to respond by providing documents such as salary slips, Form 16, bank statements, or proof of investments to explain the difference. Failure to justify the mismatch may lead to tax demand, penalties, or even reassessment. It’s important to respond promptly and, if necessary, revise your return. TaxBuddy offers expert support to help taxpayers draft accurate responses to such notices.

Q7. Is it possible to revise ITR after filing the original return? Yes, if an error or omission is discovered after filing the original ITR, it can be corrected by filing a Revised ITR under Section 139(5) of the Income Tax Act. A revised return replaces the original one and must be filed before the end of the assessment year or before the completion of assessment, whichever is earlier. For instance, if you filed your return for FY 2024–25 and noticed an income mismatch, you can file a Revised ITR by March 31, 2026. The revised return will include the corrected figures, ensuring compliance and preventing further scrutiny.

Q8. How does TaxBuddy help in managing income mismatch and ITR filing? TaxBuddy simplifies income mismatch management using AI-driven tools and expert support. The platform automatically imports income data from Form 26AS, AIS, and TIS, compares it with user-provided information, and flags discrepancies before submission. If a mismatch is found, the system provides guided corrections or connects the user to a tax expert for professional review. TaxBuddy’s expert-assisted plans also include post-filing support for notices, helping users resolve compliance issues smoothly. Its mobile app ensures taxpayers can verify, revise, and refile their returns easily from anywhere.

Q9. How to access the Compliance Portal for mismatch details? The Compliance Portal is accessible through the official Income Tax e-filing website. After logging in with your PAN and password, navigate to the “Pending Actions” or “Compliance” section. Here, you can view mismatches, underreported income, and unverified transactions flagged by the Income Tax Department. The portal displays transaction-level details and provides options to respond, confirm, or correct information. It’s advisable to review these alerts regularly, especially before filing or revising your ITR. TaxBuddy integrates these compliance checks into its system to help users resolve mismatches more efficiently.

Q10. What happens if a mismatch leads to a Section 143(1) notice? A Section 143(1) notice is an intimation from the Income Tax Department highlighting differences between the income reported by the taxpayer and the data available with the department. It may indicate underreported income, excess TDS claims, or computational errors. The notice requires the taxpayer to review and respond within the specified time, usually 30 days. If the mismatch is genuine, filing a Revised ITR is the best way to correct it. TaxBuddy’s expert-assisted services help taxpayers analyze the notice, identify errors, and respond accurately to avoid penalties or further scrutiny.

Q11. Can small rounding-off differences cause a mismatch? Minor rounding-off differences are common and generally do not attract scrutiny from the Income Tax Department. However, if the differences are significant or consistent across multiple income heads, they can trigger automated mismatch alerts. It is best practice to round off income figures as per Section 288A of the Income Tax Act — to the nearest ten rupees — to maintain uniformity. While small rounding variances are usually ignored, ensuring accuracy minimizes the risk of unnecessary queries or delays in refund processing.

Q12. How does ITR-U help in resolving post-filing income mismatches? ITR-U, or the Updated Return, introduced under Section 139(8A), allows taxpayers to correct or declare additional income after the filing window for Revised ITRs has closed. This facility helps taxpayers rectify omissions or underreported income voluntarily within 24 months from the end of the relevant assessment year. Filing an ITR-U also reduces the risk of penalties for undisclosed income, as it enables self-correction before the department initiates action. TaxBuddy guides users through the ITR-U filing process, ensuring all data is accurately updated and compliant with current tax laws.