What happens if I miss reporting a bank account in my ITR?

Missing an active bank account in your ITR can lead to compliance issues. The Income Tax Department requires disclosure of all non-dormant accounts, and omissions may result in penalties or delayed processing.

Can I use TaxBuddy for reporting business income in my ITR?

Yes, TaxBuddy helps simplify reporting business income by guiding you through the process, ensuring correct form selection, accurate TDS reconciliation, and error-free income and deduction reporting.

What is Form 10-IEA and when is it required?

Form 10-IEA is required if you are opting out of the new tax regime for FY 2024-25 (AY 2025-26). It must be filed with your ITR, and the acknowledgment number should be quoted in your return.

How do I reconcile my TDS with Form 26AS?

Check your TDS details in Form 26AS on the e-filing portal and ensure they match the TDS claimed in your ITR. Mismatches may lead to discrepancies or tax notices.

What is the penalty for late filing of ITR?

A penalty of up to ₹5,000 may apply if you file after the due date. For those with income below ₹5 lakh, the penalty is ₹1,000. Persistent delays may result in legal consequences.

Can I claim deductions under Sections 80C to 80U in my ITR?

Yes, deductions under sections like 80C (PF, PPF), 80D (health insurance), and 80U (disability) can be claimed. Ensure all claims are supported with valid documentation and details.

How do I disclose all active bank accounts in my ITR?

You must list all non-dormant bank accounts in your ITR, including bank name, account number, and IFSC code. Dormant accounts are exempt but ensure accurate reporting for compliance.

Can TaxBuddy assist with business income reporting and compliance?

Yes, TaxBuddy offers a complete solution for business income reporting, from correct form selection to TDS reconciliation, helping you stay compliant and avoid discrepancies.

What is the turnover limit for businesses under Section 44AD?

Under Section 44AD, businesses with turnover up to ₹3 crore can opt for presumptive taxation, declaring 8% or 6% of turnover as income, thus simplifying tax compliance.

How do I avoid discrepancies between my ITR and Form 26AS?

Cross-check your reported income, TDS, and other credits in your ITR with Form 26AS and AIS before filing to ensure consistency and avoid triggering tax notices.

Can I file ITR-1 or ITR-4 if I have long-term capital gains?

You can use ITR-1 or ITR-4 if LTCG from shares or equity mutual funds does not exceed ₹1.25 lakh. For higher gains or multiple income sources, use ITR-2 or ITR-3.

How do I file mandatory audit reports if my turnover exceeds the limit?

If turnover exceeds ₹1 crore (businesses) or ₹50 lakh (professionals), accounts must be audited by a CA. File the audit report and financials with your ITR before the due date.

Reporting Business Income Accurately and Avoiding Tax Notices for Discrepancies in Your ITR

Bhavika Rajput
2 days ago
8 min read

Accurate reporting of business income is crucial for ensuring tax compliance and avoiding penalties. Discrepancies in your Income Tax Return (ITR) can trigger notices from the Income Tax Department, leading to further scrutiny, penalties, and interest charges. For business owners, professionals, and companies, adhering to the updated tax guidelines for the financial year 2024-25 (Assessment Year 2025-26) is essential. Explore the key steps for reporting business income accurately, highlight common mistakes that lead to tax notices, and provide actionable tips for avoiding these issues. With the right approach, you can ensure your tax filings are compliant and stress-free.

How to report Business Income Accurately and Avoiding Tax Notices for Discrepancies in Your ITR?
Key Steps for Accurate Business Income Reporting
Common Reasons for Tax Notices Due to Discrepancies
New and Updated Rules for FY 2024-25 (AY 2025-26)
Tips to Avoid Tax Notices
How TaxBuddy Helps in Accurate ITR Filing
Conclusion
FAQs

How to report Business Income Accurately and Avoiding Tax Notices for Discrepancies in Your ITR?

To report business income accurately and avoid tax notices for discrepancies in your ITR, ensure that all income sources, including receipts, sales, and additional earnings like interest or capital gains, are fully disclosed. Maintain proper books of accounts, reconcile your income with Form 26AS and AIS, and ensure that TDS/TCS credits are correctly reported. Select the appropriate ITR form based on your business structure, and disclose all active bank accounts as per the latest requirements. Additionally, file mandatory forms like Form 10-IEA if opting for the new tax regime, and provide detailed deductions with supporting documentation. Using a reliable platform like TaxBuddy can simplify the process, offering tools for accurate reporting and compliance to minimize the risk of discrepancies and tax notices.

Key Steps for Accurate Business Income Reporting

Accurate business income reporting is the foundation of a smooth tax filing process. Here are the essential steps:

Maintain Proper Books of Account: Keeping up-to-date and accurate records is vital. Ensure that all receipts, sales, bank statements, and invoices are recorded and reconciled. For businesses with a turnover exceeding ₹1 crore (₹10 crore for those with 95%+ digital transactions), a tax audit is mandatory. This audit helps verify that the accounts are maintained properly and reflects the business's true financial standing.
Choose the Correct ITR Form: Selecting the correct ITR form is essential. For businesses or professionals, ITR-3 is the appropriate form for individuals/HUFs with business or professional income. ITR-4 should be used by those opting for presumptive taxation under Sections 44AD, 44ADA, or 44AE, which have specific turnover limits. The new ITR forms for FY 2024-25 (Assessment Year 2025-26) also require detailed fields for better income and deduction reporting
Report All Income Sources: It is important to disclose every source of income, including business receipts, interest earned, capital gains, or any other form of income. Non-disclosure or underreporting of income can lead to discrepancies that trigger tax notices.
Disclose All Active Bank Accounts: As per new regulations, all non-dormant bank accounts must be reported. Dormant accounts, defined as accounts that have been inactive for over two years, are exempt. Ensure that all your active accounts are disclosed in the ITR to avoid penalties.
Declare the Chosen Tax Regime: It is mandatory to mention whether you are opting for the old or new tax regime. If you decide to opt-out of the new tax regime for the first time, you must file Form 10-IEA, which requires quoting the acknowledgment number in the ITR.
Ensure TDS/TCS Reconciliation: The tax department cross-verifies the TDS/TCS credits you claim with your Form 26AS and AIS (Annual Information Statement). Ensure that all credits are correctly reported, as any mismatch can lead to notices or denial of credits.
Detailed Deduction Reporting: Deductions under Sections 80C to 80U must now be reported with full supporting details, such as policy numbers or loan account numbers. Proper documentation is essential to avoid rejection of claims.
Asset and Liability Reporting: If your total income exceeds ₹1 crore, you must provide a statement of assets and liabilities as part of the ITR. This helps the tax authorities understand your financial position, which can impact your overall tax liability.

Common Reasons for Tax Notices Due to Discrepancies

Tax notices are often issued due to common mistakes or discrepancies in the ITR filing process. Here are some of the most frequent reasons:

Mismatch Between Reported Income and AIS/26AS:The Income Tax Department cross-verifies your reported income with data available in third-party sources like banks and TDS returns. Any mismatch, such as underreporting or misreporting, can trigger automated notices.
Non-disclosure of High-Value Transactions:Large cash deposits, high-value purchases, or foreign remittances above the prescribed thresholds must be disclosed. Failing to do so can lead to discrepancies and tax notices.
Incorrect or Incomplete Reporting of Bank Accounts:Omitting active bank accounts is a serious compliance violation, and the tax department now mandates reporting of all non-dormant accounts. Missing this step can attract penalties.
Failure to File Mandatory Forms:Failing to file required forms, such as Form 10-IEA (if opting for the new tax regime for the first time) or audit reports (if applicable), can result in notices or rejection of the return.

New and Updated Rules for FY 2024-25 (AY 2025-26)

The tax department has introduced several key changes for the financial year 2024-25. These include updates on presumptive tax limits, mandatory bank account disclosures, and specific reporting for capital gains. The key changes are:

Change/Requirement	Details
Enhanced Presumptive Tax Limits	Turnover limit for Section 44AD has been raised to ₹3 crore; Section 44ADA to ₹75 lakh (if 95%+ digital)
Mandatory Bank Account Disclosure	All non-dormant accounts must be reported
LTCG Reporting in ITR-1/ITR-4	Allowed for LTCG up to ₹1.25 lakh from equity mutual funds/shares.
Clause-level Deduction Reporting	Detailed selection and supporting details for deductions
Asset & Liability Reporting Threshold Increased	Now mandatory only if income exceeds ₹1 crore.
New Section 44BBC for Cruise Shipping Business	Separate reporting introduced for cruise shipping business

Tips to Avoid Tax Notices

To ensure your ITR filing is smooth and avoid tax notices, follow these tips:

Double-check All Figures:Carefully verify all figures, especially for gross receipts, turnover, and deductions. This minimizes the risk of errors in the reported income.
Reconcile with Form 26AS and AIS:Always cross-check your income and TDS details with Form 26AS and AIS before filing your return. Mismatches can lead to tax notices and delays.
File All Mandatory Forms:Ensure that all required forms (e.g., Form 10-IEA) and audit reports are filed on time to prevent non-compliance.
Avoid Last-Minute Filing:Filing at the last minute increases the chance of errors. Submit your return in advance to give yourself time for corrections if needed.
Respond Promptly to Notices:If you receive a notice, respond quickly to avoid further complications. Ignoring a notice can lead to additional penalties and interest.

How TaxBuddy Helps in Accurate ITR Filing

TaxBuddy is a comprehensive tax filing platform that simplifies the process of business income reporting. It helps you:

Select the Correct ITR Form:TaxBuddy guides you through choosing the correct form based on your business structure.
Automate TDS and Income Reconciliation:The platform cross-checks your TDS and income with Form 26AS and AIS, ensuring accurate reporting.
Detailed Deduction and Document Reporting:TaxBuddy helps you report deductions with the necessary supporting documents, reducing the risk of rejection.
Offer Expert Assistance:If you need help, TaxBuddy provides access to tax experts who can answer your queries and help you file correctly.

By using TaxBuddy, you can ensure that your tax filings are compliant and accurate, minimizing the chance of discrepancies and tax notices.

Conclusion

Accurate business income reporting is essential for tax compliance and avoiding tax notices. By following best practices such as maintaining updated records, reporting all income sources, and reconciling TDS details, you can significantly reduce the risk of discrepancies. Platforms like TaxBuddy can simplify this process, providing expert guidance and real-time assistance to ensure your filings are correct. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.

FAQs

What happens if I miss reporting a bank account in my ITR?
Failing to report an active bank account in your ITR can lead to a compliance violation. The Income Tax Department requires disclosure of all non-dormant accounts, and omission may result in penalties or delayed processing of your return. Always ensure that all your active accounts are listed, as this can help avoid unnecessary scrutiny.
Can I use TaxBuddy for reporting business income in my ITR?
Yes, TaxBuddy simplifies the process of reporting business income by offering a user-friendly platform that guides you through every step of your filing. It helps with form selection, reconciliation of TDS credits, and ensuring that your income and deductions are accurately reported, reducing the risk of errors and discrepancies.
What is Form 10-IEA and when is it required?
Form 10-IEA is required if you are opting out of the new tax regime for the first time in the financial year 2024-25 (Assessment Year 2025-26). This form must be filed along with your ITR, and the acknowledgment number needs to be quoted in your return. Failure to file this form can result in your return being rejected.
How do I reconcile my TDS with Form 26AS?
To reconcile your TDS with Form 26AS, first check the TDS details reported in your Form 26AS, which is available on the Income Tax e-filing portal. Ensure that the TDS claimed in your ITR matches the TDS entries in the form. Any mismatch between your TDS credits and Form 26AS can result in discrepancies and may trigger a tax notice from the department.
What is the penalty for late filing of ITR?
If you miss the deadline for filing your ITR, a penalty of up to ₹5,000 may be levied if filed after the due date (31st July for most individuals and businesses). For taxpayers with income below ₹5 lakh, the penalty is reduced to ₹1,000. In case of deliberate delay or non-filing, further penalties or legal actions may apply.
Can I claim deductions under Sections 80C to 80U in my ITR?
Yes, you can claim deductions under various sections such as 80C (investments in PF, PPF, LIC), 80D (health insurance), and 80U (disability), among others. Ensure that you provide all necessary documentation, such as policy numbers, receipt numbers, and account details, to substantiate your claims and avoid rejection by the Income Tax Department.
How do I disclose all active bank accounts in my ITR?
To disclose your active bank accounts, you must list all non-dormant accounts held during the financial year in the updated ITR forms. The form requires you to provide details such as the bank name, account number, and IFSC code. Dormant accounts (inactive for over two years) do not need to be disclosed, but ensure accuracy in reporting to prevent non-compliance issues.
Can TaxBuddy assist with business income reporting and compliance?
Yes, TaxBuddy provides a comprehensive solution for reporting business income. It ensures that your income is accurately reported, reconciles your TDS credits, and assists with form selection based on your business structure. TaxBuddy's platform is designed to simplify tax filing and avoid discrepancies, ensuring you stay compliant with the Income Tax Department's requirements.
What is the turnover limit for businesses under Section 44AD?
Under Section 44AD, the turnover limit for businesses opting for the presumptive taxation scheme has been increased to ₹3 crore. This scheme allows businesses to declare 8% or 6% of their turnover as their income, reducing the complexity of tax filing. If you meet the criteria, you can opt for this scheme to simplify your tax reporting.
How do I avoid discrepancies between my ITR and Form 26AS?
The key to avoiding discrepancies is to carefully match your reported income, TDS, and other credits with the details shown in your Form 26AS. Before submitting your return, cross-check the information in your ITR with Form 26AS and the Annual Information Statement (AIS) to ensure everything aligns correctly.
Can I file ITR-1 or ITR-4 if I have long-term capital gains?
Yes, if you have long-term capital gains (LTCG) from equity mutual funds or shares up to ₹1.25 lakh, you can file ITR-1 or ITR-4. However, if your gains exceed this limit, you will need to report them in a separate section of the ITR, and you may need to file ITR-2 or ITR-3 based on your other income sources.
How do I file mandatory audit reports if my turnover exceeds the limit?
If your turnover exceeds the prescribed limit for tax audit (₹1 crore for businesses or ₹50 lakh for professionals), you must get your accounts audited by a qualified CA. The audit report, along with the audited financial statements, must be filed along with your ITR before the due date. Failure to file the audit report may result in the rejection of your return.