Summary
Mismatch between Form 16 and Form 26AS may result in denial of exemptions like HRA or LTA. A recent ITAT ruling clarifies that disallowance without AO verification is invalid. Taxpayers can seek re-verification and relief if mismatch is due to employer error.
Mismatch Between Form 16 and Form 26AS: What You Must Know
Form 16 and Form 26AS mismatch is a growing reason for scrutiny by the Income Tax Department, especially where exempt allowances like HRA, LTA or medical reimbursements are concerned. A recent Income Tax Appellate Tribunal (ITAT) judgment provides major relief to salaried taxpayers who faced tax demand due to this issue.
What Happened in the Case?
- A salaried taxpayer claimed exemption on House Rent Allowance (HRA) and Leave Travel Allowance (LTA).
- However, these were not reflected in Form 26AS, leading the Assessing Officer (AO) to disallow the exemptions and raise a tax demand.
- The Form 16 issued by the employer had details of exemptions but was not matched by entries in Form 26AS.
- The case went to the ITAT, Pune Bench, which held that exemptions cannot be denied without proper verification by the AO.
Key ITAT Observations
| Point | ITAT View |
|---|---|
| 1 | AO must verify Form 16 entries with employer if Form 26AS lacks data |
| 2 | Exemptions cannot be denied automatically due to mismatch |
| 3 | AO has a duty to ensure proper enquiry under Section 143(3) |
| 4 | Taxpayer cannot be penalised for employer’s TDS reporting errors |
Source: ITAT Pune Bench ruling in Vikas Bhatia v. ITO, Ward-1(2), Pune (ITA No. 118/PUN/2023)
Why Do These Mismatches Occur?
- Employer delay/failure in depositing TDS
- Incorrect PAN or reporting errors in quarterly TDS returns
- Technical delay in Form 26AS update
- Non-inclusion of exempt components in TDS filings (Form 24Q)
What the Law Says
- Section 10(13A) – HRA exemption
- Section 10(5) – LTA exemption
- Section 143(3) – Powers of AO during assessment
- CBDT Instruction No. 5/2014 – Verification required before disallowance
Expert Tip
If your Form 16 reflects the exemption but 26AS doesn’t, attach Form 16, salary slips, and rent receipts in your ITR filing and maintain records. In case of a notice, request the AO to verify directly with your employer, as allowed under law.
How Taxpayers Should Respond
- Do not ignore mismatch notices from CPC or AO
- Submit a written explanation along with Form 16, salary slips, and employer details
- Seek remand to AO during appeal if verification was not properly done
- File grievance or rectification request if the mismatch is due to TDS credit issues
What to Learn from This Ruling
Form 16 and Form 26AS mismatch – action steps:
- ✅ Match Form 16 with 26AS before filing ITR
- ✅ Flag any mismatch to the employer and request correction
- ✅ Disclose all exempt income in ITR clearly
- ✅ Maintain all proofs like rent receipts and travel bills
- ✅ Use Form 26AS and AIS (Annual Information Statement) together
FAQs: Form 16 and 26AS Mismatch
Q1. Can I claim exemption if it’s not in Form 26AS but present in Form 16?
Yes, with supporting documents, and after proper AO verification.
Q2. Who is responsible for mismatch — taxpayer or employer?
Mostly employer, especially for non-reporting or late TDS returns.
Q3. Can mismatch lead to penalty?
Not directly, but disallowance may increase tax liability and interest.
Conclusion: Don’t Panic, Verify and Rectify
A Form 16 and Form 26AS mismatch is not the end of the road. Thanks to the ITAT ruling, taxpayers have a legal route to defend valid exemptions. Always maintain clear records and reach out to tax experts like Efiletax for professional help.