Government Sends Personalized Emails to 4.4 Million Taxpayers Regarding Significant Discrepancies

During last year's tax filing period, the government sent approximately 4.4 million "targeted" emails to individuals with significant discrepancies between their reported income and account transactions. 

This marks the first instance of the income tax department issuing warnings to assist taxpayers in avoiding tax notices. These emails were sent with tax returns filed for the 2023-24 assessment year, reflecting incomes from the 2022-23 financial year.

These emails are aimed at addressing significant discrepancies rather than minor ones," stated Nitin Gupta, Chairman of the Central Board of Direct Taxes (CBDT).

The emails convey a straightforward message: the income reported in the taxpayer's return does not match the income reported to the income tax department. Consequently, the taxpayer is advised to submit a revised return. The CBDT, a division of the Union finance ministry, oversees the administration of direct taxes, including income tax.

Typically, the initial filing deadline is July 31, with a provision for submitting revised returns until December 31. Taxpayers who missed the July 31 deadline can still file their original returns by December 31, albeit with a penalty of up to ₹5,000.

Experts note that receiving a tax notice carries more serious consequences, potentially leading to scrutiny and penalties proportional to the outstanding dues.

Sources have highlighted that the email warning system aligns with the government's efforts to make business and living easier. The tax department is understanding of unintentional mistakes made by taxpayers and aims to remind them about any unintentional omissions in income reporting.

While some non-compliance arises from a lack of awareness, deliberate cases of tax evasion also exist. In such deliberate cases, enforcement actions are taken, yielding positive outcomes.

Regarding emails, they were targeted at a third category of cases. These involve taxpayers who file returns, but the reported income doesn't match their financial transactions, such as property purchases or investments in securities or mutual funds. For such cases, the tax department employs methods like e-verification, where discrepancies are flagged, and taxpayers are asked to explain.

Targeted emails were sent out for the assessment year 2023-24 before the deadline for filing revised returns, allowing taxpayers to make necessary adjustments.

Confidence in the taxation system's transparency and efficiency due to ease of compliance and technological advancements, have significantly reduced tax evasion and boosted government revenue from direct taxes. Due to robust tax collections, the finance minister increased the CBDT's target for the fiscal year 2023-24. 

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