After a taxpayer files ITR (Income Tax Return), the tax department checks the return and issues an intimation notice. The intimation includes the return details of the taxpayer. A mismatch in the orders of the Assessing Officer can be handled in the following ways – agree with the IT department and pay what they demand and file for rectification. Section 154 of the Income Tax Act works on the errors arising from the tax returns of an assessee. Keep reading this article to get an overview of this crucial provision!

What is Section 154 of the Income Tax Act

Section 154 involves correcting any errors arising from the tax details. It also includes rectification of orders from an Assessing Officer. Corrections can be made for orders passed under Sections 206CB(1), 200A(1) and 143(1).

However, only obvious mistakes from the intimation notice can be considered for rectifications. Sections 206CB(1) and 200A(1) involve processing and rectifying mistakes in TCS (Tax Collected at Source) and TDS (Tax Deducted at Source) statements. Section 143(1) covers summary assessment and issuing intimation notices.

Section 154 of Income Tax Act Features

Some of the basic features of this Section are as follows:

Only an authorised officer can issue a notice u/s 154.
Taxpayers can also send an application to the income tax authority for rectification.
Taxpayers must be notified about the rectifications through mail or via post. There can be changes such as an increase in tax liability or a decrease in the refund.
Under this provision, the tax department can demand additional refunds if the amount of refund decreases after reassessment.
A taxpayer’s application for correction must be resolved within six months from the month-end in which he/she has applied.
When a correction requirement arises on its own, the matter can get resolved within 4 years from the year-end when the rectification order was issued.
A revision or an appeal cannot be corrected via rectifications.
A commissioner can issue an order for correcting mistakes. Such a notice can be passed upon a taxpayer’s application or on its own.

Also Read: Section 193 Of The Income tax

Errors that Can Be Corrected by Section 154

Section 154 of the Income Tax Act considers the following mistakes for correction:

A mistake due to ignoring mandatory law provisions
Clerical errors
Arithmetic errors
Factual mistake

Some illustrations of these mistakes are as follows:

Mismatch in advance tax
A discrepancy arising in tax credit
Gender specified is incorrect
While filing ITR, additional information related to capital gains is absent.

You cannot send a correction request for modifying your address or bank account details in tax returns.

List of Orders That Can be Rectified under Section 154

The following orders can be rectified under the notice or order of an Income Tax Officer or Assessing Officer:

Any order passed under provisions of the Income Tax Act
Any notice sent under Section 143(1)
Any intimation passed under Section 200A (1) regarding TDS return
Any notice sent under Section 206CB (1) regarding TCS return

Procedure for Filing Correction Request Online under Section 154

Follow the below-mentioned pointers to file for rectification under Section 154 of the Income Tax Act:

Step 1: Log in to the income tax portal.
Step 2: Under ‘e-file’, choose ‘Rectification’ from the drop-down menu.
Step 3: Choose ‘Income Tax’ for ‘Order/Intimation to be rectified’ and give the assessment year under which you will file rectification.
Step 4: Press ‘Continue’ to move to the next page.
Step 5: Choose ‘Request Type’ depending on the reason for correction.
Step 6: You need to select ‘Return Data Correction (XML)’ after giving the reason.
Step 7: You can choose up to four reasons for rectification.
Step 8: Choose the Schedules in the ITR being modified.
Step 9: Now, upload the rectification XML file.
Step 10: Click on ‘Only Reprocess the return’ if you require it (no need to upload ITR).

After submission, you will get a Reference Number and your application will go to Bangalore, CPC. After examining the request, the tax authority will issue an order.

Things to Consider Before Filing a Rectification Request under Section 154

While filing a rectification request under Section 154 of Income Tax, you have to comply with the following terms and conditions:

You should be a registered user in the e-filing portal to file a rectification request
If you have received a digital return, you can only file for online rectification for the same
The intimation must be issued under Section 143(1) or Section 154 by the Income Tax department
IT returns for the relevant assessment year should have been processed
If any intimation under Section 143(1) or Section 154 is not applicable to you, then you can submit a new service request for intimation
If the rectification rights are transferred to AO, a rectification request should also be submitted in such cases
If you had any pending refund and demands and they have been adjusted for the current assessment year, then the rectification request should be submitted for that other assessment year only

Also Read: Section 115BA Of The Income Tax Act

When Should You File a Rectification Request?

Rectification requests can only be made under some specific conditions. These are called “mistakes apparent from records”. By records, the documents are referred based on which the rectification can be made i.e., Form 16, Form 26AS, deduction proof, income statement etc.

Following are the circumstances under which you can file a rectification request:

Factual errors
Mathematical mistakes
Mistaken application of any provision of the Income Tax Act
Tax payments not matched with the CPC order
Application for cancellation of the overdue amount
Deduction details under sub-section 80G, 80IA, 80IB, and 80IC under Chapter VIA were mistakenly considered
Salary income not matched
Income taxable under the head House Property inaccurately considered
Difference in tax calculation even if the total income remains the same
Change is residential status
Request for the reduced claim in income as the taxpayer is governed by ‘Portuguese Civil Code’ and comes under Section 5A

Rectification Time Limits under Section 154

A taxpayer can file for rectification within four years from the end of the financial year in which the intimation that needs to be amended was passed. The order doesn’t necessarily have to be an original; it can be an amended or rectified order.

Major Differences between Revised Return and Rectification

Rectification can only be filed after the return is processed or intimation under Section 143(1) is received. If rectification is filed for an order then it can be filed within 4 years from the end of the financial year in which the order needs to be rectified was passed. However, a revised return can be filed before completion of the assessment or the end of the relevant assessment year, whichever is precedent.

Final Word

Before filing income tax returns, taxpayers must carefully compute the tax implications and exemptions. Section 154 of the Income Tax Act only encourages error corrections apparent from tax records. If you have filed your ITR online, a rectification request must be generated online. Read the regulations of the IT department carefully before submitting applications for rectifications.

FAQs on Section 154 of the Income Tax Act

Q1. What is Section 154 of the Income Tax Act time limit?

Ans: The time limit for Section 154 of the Income Tax Act is 4 years. After 4 years, the order of rectification cannot be passed.

Q2. Who cannot submit ITR-4 forms?

Ans: Partnership firms, individuals and HUF who have opted for presumptive income scheme u/s 44ADA can submit the ITR-4 form. However, the following cases are not a part of this form:
Taxpayers whose accounting records need to be audited as per the IT Act.
Earnings from other sources, house property or salary that exceed Rs. 50,00,000.
An organisation’s director investing in unlisted shares cannot use it.

Q3. What does Form 26AS entail?

Ans: Form 26AS refers to a statement that showcases any amount subtracted as TCS or TDS from a taxpayer’s earnings. It also gives information about a taxpayer’s high-valued financial transactions, self-assessment tax, advance tax and foreign remittances.

Q4. What is an ITR-6 form?

Ans: Companies that do not claim tax exemptions u/s 11 can file their tax returns in the ITR-6 form. All companies registered under the Companies Act 2013 or Companies Act 1956 have to file this form. Section 11 offers exemptions to companies that earn from properties used for religious or charitable activities.

Q5. What is Form 16A?

Ans: Form 16A denotes a TDS certificate that highlights TDS on earnings (except salary income). It includes TDS subtracted on:
– Interests from fixed bank deposits
– Rent receipts
– Insurance commission
It carries information such as challan of TDS deposits, TAN/PAN, address and name of deductee and deductor.

Q6. Should I file the rectification request online or offline under section 154?

Ans. If you have your ITR filed online, then you have to submit a rectification request for the same online through the e-filing portal.

Q7. Can I withdraw my rectification request?

Ans. No, a rectification request once submitted cannot be withdrawn. It will be closed only after a rectification order is passed.