Section 154 of Income Tax Act

Section 154 of the Income Tax Act of 1961 authorises the Income Tax Department to correct errors visible on the record in any order issued by the Assessing Officer.

The primary goal is to correct any errors or omissions that may have occurred during the assessment process, preventing taxpayers from incurring an undue financial burden.

Section 154's main points of interest are:

• The Income Tax Department may identify an incongruity, or the tax authority may choose to send an order under Section 154 of its own initiative. This could be, among other things, an order requesting more information, a gender error, a tax credit mismatch, a refund mismatch, or an advance tax discrepancy.

• Any action under this section requires notice to the taxpayer, particularly if it results in "enhancing an assessment or lowering the refund cost or the increase of the liability of the assessee or the deductor.”

• This means that the I-T Department is required to give written notice and give taxpayers an opportunity to respond before acting if any amendment under Section 154 would raise taxes on the assessee, increase income, or decrease tax exemptions. The taxpayer will receive this notice via email or the mail.

• Refunds to the assessee are the responsibility of the I-T Department in cases where an action taken under Section 154 could lead to a decrease in taxes or an increase in exemptions.

• The department will demand payment from the taxpayer for any excess refund if it has already issued one, but the amount is lowered following the reassessment.

• Only 4 years after the end of the specific fiscal year in which a rectification order was passed may a notice under Section 154 be issued.

• If a taxpayer requests an amendment, the department is required to respond within 6 months of receiving the request.

Section 154 is applicable in the following situations:

• Rectification of any inaccuracy or mistake found in any decision made by the Appellate Authority or Assessing Officer.

• Rectification of any obvious mistake or error in the record.

• Rectification can be requested by the taxpayer or initiated by the Assessing Officer or the Appellate Authority.

The following steps are involved in applying for rectification under Section 154:

Step 1: Visit the official portal of Income Tax.

Step 2: Log in to your e-filing account using your User ID, Password, and the Captcha code.

Step 3: After logging in, go to the “My Account” section. Under “My Account,” you will find the “Rectification” option.

Step 4: Choose the relevant Assessment Year for which you want to file rectification.

Step 5: Click on the “Rectification Request” option to initiate the process.

Step 6: You may be asked to select the type of rectification you are seeking. Select “Taxpayer is correcting data for Tax Credit Mismatch only” or “Taxpayer is correcting the Data in Rectification.”

Step 7: Ensure to fill in all the necessary details including Pan Card, Communication address, Reasons for seeking rectification and details of the mistake in the original order.

Step 8: Review all the mentioned details and documents to ensure accuracy. Once satisfied, click on the “Submit” button.

You will get an acknowledgement with a unique rectification request processing time and Request Number (RRN) after submitting the rectification request. You can use this number to track the status of your rectification request.

Log in to your e-filing account and navigate to the 'Rectification Status' option to track the status of your rectification request.

Rectification of income tax return provides several advantages to taxpayers, including:

Avoidance of Penalty and Interest

Taxpayers may be able to avoid paying penalties or interest if they use Section 154 for the rectification of errors or mistakes on their tax returns.

On-Time Correction

Taxpayers may make timely corrections to their errors under Section 154. By doing this, they are able to prevent any delays or issues that might occur if the error is discovered later.

Fast Resolution of Disputes

Section 154 Income Tax rectification can assist in swiftly and effectively resolving disputes between the tax authorities and the taxpayer. Both sides save money and time by doing this.

Legal Adherence

Under Section 154, rectification guarantees that taxpayers comply with the Income Tax Act of 1961. By doing this, they can stay clear of any legal or regulatory problems that could result from non-compliance.

Transparency and Clarity

The rectification return section encourages both of these aspects of the tax system. Establishing trust between taxpayers and tax authorities is facilitated by this.

Section 154 of the Income Tax Act is a safeguard that allows taxpayers to correct mistakes and ensure the accuracy of their tax assessments. The broad applicability of the provision, combined with the streamlined online rectification process, contributes to fair and transparent tax administration.

Knowing about provisions like Section 154 allows taxpayers to actively participate in the correction of genuine errors as they navigate the complex landscape of income taxation. Not only does timely rectification ensure accurate tax assessments but it also plays an important role in preserving the integrity of the entire taxation system.

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What is Section 154 of Income Tax?

Section 154 of the Income Tax Act allows taxpayers to correct errors visible on the record in any order issued by the Assessing Officer. It acts as a correction mechanism for clerical or arithmetic errors, ensuring the accuracy of tax assessments.

How do I respond to a notice under Section 154?

If you receive a Section 154 notice, you must respond by filing Form 26, which is available on the Income Tax e-Filing portal. Specify the nature of the error, provide all necessary information, and submit the form to the Assessing Officer who issued the original order, either physically or electronically.

What is the time limit for rectification of income tax return?

The time limit under section 154 of income tax act is within four years of the end of the fiscal year in which the order sought to be amended was passed. To ensure timely correction of errors in tax assessments, it is critical to begin the rectification process within the timeframe specified.