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CBDT’s e-Verification Scheme 2021: An Initiative to Enhance Voluntary Compliance
The CBDT's e-Verification Scheme, 2021, is an initiative by the Income Tax Department in India to promote voluntary tax compliance. It allows the department to identify discrepancies between the information taxpayers report in their Income Tax Returns (ITRs) and information received from third-party sources like banks on interest and dividend income.
What is the Income Tax Department’s e-Verification scheme?
The introduction of the e-verification scheme 2021 by the income tax department is a step towards ensuring tax compliance and identifying unreported or under-reported financial transactions by taxpayers. This scheme allows taxpayers to update their income returns under section 139(8A) of the Income-tax Act, 1961, by confirming the information provided or stating that the ITR files were reported incorrectly and updating the ITR accordingly. The scheme was introduced on December 13, 2021, with the pilot program launched in September 2022.
What are the benefits of the e-verification scheme?
- It provides an opportunity for taxpayers to update their income, which they might have missed or not reported correctly while filing the ITR.
- It enables the taxpayers to explain the financial transaction with evidence.
- It helps with data cleaning and correction.
- This scheme encourages voluntary compliance.
- The taxpayer gets the chance to explain a transaction being verified before any further action by way of Assessment or Reassessment is undertaken.
How does the e-Verification Scheme 2021 work?
If the reporting entity confirms the information provided, a notice is sent under Section 133(6) requesting an explanation for why that particular transaction was not included in the ITR. The notice can be accessed at https://eportal.incometax.gov.in. Once a communication is sent to the taxpayer under the e verification scheme 2021, they must confirm the information provided and, state that the ITR files were reported incorrectly, and update the ITR accordingly. Or they need to submit supporting documents if they do not agree or confirm the claims made by the Income Tax Department. Based on the explanation provided by the taxpayer, the e-verification authority will form an opinion and send a communication to the taxpayer. It's important for taxpayers to provide accurate and detailed explanations for any discrepancies identified by the e-verification authority to avoid further scrutiny and penalties. Taxpayers can file updated returns for FY 19-20, FY 20-21, and FY 21-22 until March 2023, March 2024, and March 2025, respectively.
How to submit the notice received under Section 133(6)?
Step 1:- Login to the e-filing portal.
Step 2:- Under the “Pending actions” tab, click on “Compliance Portal” and select “e-Verification” or ‘“e-Campaign.” Select the applicable Financial year under e-Campaign. If you go to e-verification, it will take you directly to step no. 4
Step 3:- On click of the ‘Proceed’ button, you will be redirected to Compliance Portal.
Step 4:- Click on the e-verification box to receive the list of e-proceedings.
Step 5:- Click the ‘Submit ‘ button to respond to the notice. A form will appear in front of you. Fill out the form and provide the documents as provided in the form. Please find below the list of documents that you might need to submit a response to the notice.
Step 6:- After clicking on “Submit,” provide the remarks attaching the supporting document.
Step 7:- Finally, click on “Submit” and submit the response to the notice.
The entire process of the e-verification scheme 2021, including the communication of notices and their responses, works digitally. The information is displayed through the Annual Information Statement (AIS), a digital document containing details of all financial transactions made by the taxpayer during the financial year. The CBDT (Central Board of Direct Taxes) has set a timeline of 90 days for completing a particular case under the e-verification scheme 2021, while the taxpayer has 15 days to respond to their case. However, this timeline may take longer for complicated cases.
How many cases have been picked as a pilot basis for e-Verification?
On a pilot basis, about 68,000 cases have been taken up for e-Verification pertaining to the financial year 2019-2020. Out of these, approximately 35,000 cases have been completed by the designated Directorate, and the remaining cases are under verification. The department has already received an amazing response as 15 lakh updated returns have already filed, and revenue of Rs 12,50 crore has been received by the department from updated returns.
The details regarding these transactions were sent to the taxpayers through an e-campaign. Furthermore, CBDT has also introduced FAQs on the e-Verification Scheme 2021, which will help taxpayers with their queries for better transparency.
The system selects the returns with a high likelihood of containing unreported or under-reported financial transactions. Suppose the taxpayer does not respond to the notice or fails to provide a satisfactory explanation. In that case, the case will be selected for scrutiny, which is a more detailed and comprehensive examination of the taxpayer's financial records and transactions.
Frequently Asked Questions
Q- When was the e-verification scheme launched?
The e-verification scheme was notified on December 13, 2021.
Q- When was the pilot plan of an e-verification scheme launched?
The pilot plan was notified in September 2022 pertaining to the financial year 2019-20.
Q- Is the e-Verification of ITR and e-Verification scheme the same?
No, e-Verification of ITR is verification of ITR once the ITR filing process is done. ITR is only considered valid if the e-Verification is done within the stipulated timeline. On the other hand, the e-Verification scheme offers voluntary compliance with the help of information technology.
Q- Where can one find all the information regarding the financial transactions reported to the Income Tax Department?
All the financial information, like TDS/TCS receipts, bank deposits, and more, can be viewed easily in the AIS portal.
Q- What will happen if I object to an AIS transaction?
In this situation, there could be two scenarios:-
- If a mistake has occurred, the data will be corrected in due course after the source or reporting entity files its corrected statement. This procedure is carried out using an automated information technology-driven procedure.
- If the source does not support your objection, you will be required to provide additional evidence under the e-Verification Scheme 2021.
Q- How can one be notified if the e-Verification notice is received?
The notice is emailed to the most recent email address provided to the Income Tax Department. You will also receive a text message on the most recent mobile number associated with your PAN. Furthermore, the notice can also be checked on your incometax.gov.in e-filing portal account.
Q- What does successfully e-verified mean on an income tax return?
E-verification/Verification Accomplished: This status indicates that you’ve submitted and properly e-verified/verified your return, but processing of the return has not yet taken place. Processed: This status is assigned when your return has been effectively processed.
Q- What is the difference between AIS and 26AS?
The AIS is a new feature that the income tax department introduced in November 2021. It gives more information than Form 26AS. This is because it shows not only the tax details but also the income details from various sources (salary, interest income, dividends, capital gains) that the taxpayer earned during the financial year.
