ITR: How does the income tax department assess your income?
The deadline to verify income tax returns is today, August 30. Take a look at what data is used by the Income Tax Department to assess a taxpayer’s income.
Today, August 30, is the deadline to e-verify income tax return (ITR). The deadline to file the ITR for Financial Year 2022-23 was July 31 and the tax return had to be verified within 30 days. In simple terms, the income tax return is a form that is used to submit information about an individual's income to the government. On the basis of the person's income, their tax liability is calculated. If it is found that the person has paid excess taxes, the amount will be refunded. The ITR needs to be filed every financial year before a specified date. If they fail to abide by the deadline, taxpayers need to pay a penalty.
With the Income Tax Department in the middle of processing refunds, many individuals might be wondering about how their income is assessed. The tax authorities take a number of factors into account before arriving at the conclusion that a refund is due, if any. Take a look at the methods used by the Income Tax Department to gauge a taxpayer’s income.
How does the income tax department assess income?
After taxpayers file their income tax returns with all the relevant information regarding their income and other earnings, the data is scrutinised by the department and verified before processing of the refunds. The verification is done to ensure the accuracy and authenticity of the information.
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Some of the common methods are:
1. Cross-check details with Form 16/16A: The department crosschecks the details provided in the ITR with those provided in Form 16 (for salaried people) and Form 16A for (non-salaried people). These forms are issued by the employer or the deductors, and contain all the information about the taxpayer's income, deductions, and taxes due.
2. TDS verification: The income tax department also checks the details of tax deducted at source as mentioned in the income tax returns along with the information provided by the employer in Form 16 or 16A. Any discrepancies in the details may invite further scrutiny.
3. Bank verification: One of the major steps that the department takes to verify taxpayers' income is checking the details of the bank accounts mentioned in the ITR. By going through the financial information, they crosscheck an individual’s savings, interest earned, and other transactions.
4. Verification of form 26AS: Also known as the Annual Income Statement, form 26AS is a consolidated tax credit statement given by the Income Tax Department. The statement shows all the records of taxes that were deducted on your behalf or paid by you.