PROSPERR.IO

Here's something that catches taxpayers off guard: the Income Tax Department has been running this verification scheme since December 2021, and a lot of people still don't know what it is. The CBDT put out Notification No. 137/2021, and basically what it does is match what you reported in your return against what banks, employers, and other entities told the department about your finances.

Sounds simple enough. But the way it actually works through automated systems firing off notices when numbers don't match—can be confusing if you've never dealt with it before.

What This Scheme Actually Does

Think of it as an early warning system. The tax department gets information about your financial transactions from all sorts of places—your bank reports interest you earned, your employer reports your salary, stock brokers report share sales. All of this goes into something called the Annual Information Statement.

Then their system compares that AIS data with what you filed in your tax return. When there's a mismatch—say, the bank reported ₹50,000 interest but your return shows ₹30,000—the system flags it.

Instead of jumping straight to reassessment or penalties, they send you a notice under Section 133(6) asking for an explanation. That's the e-Verification Scheme. It's meant to give you a chance to explain or correct things before matters escalate.

The scheme covers everyone filing returns in India. Individuals, HUFs, companies, firms—doesn't matter. If there's a data mismatch that crosses a certain threshold, you might get a notice.

Wait, Isn't This Just Regular ITR Verification?

No, and this trips people up constantly. When you file your tax return, you have to verify it within 30 days—that's routine ITR e-verification. You use Aadhaar OTP or net banking or whatever method you prefer. Every single return needs this step.

The e-Verification Scheme is completely different. This kicks in later, sometimes months after you've already filed and verified your return. It happens only if the department's systems detect a mismatch between what you reported and what their data shows.

So if you get a Section 133(6) notice months after filing, don't panic thinking your return wasn't verified properly. That verification happened already. This is a separate thing.

How This Whole Thing Works

The process isn't complicated, but understanding the flow helps.

First, data collection happens throughout the year. Your bank files statements about interest paid to you. Your employer files your salary details. Stock brokers report trades. Property registrars report real estate deals. All of this feeds into your AIS that's the Annual Information Statement the department maintains for you.

Next comes the matching part. Systems compare your AIS against your filed ITR. Looking for things like income shown in AIS but missing from your return, or amounts that don't match, or income reported under the wrong category.

When a mismatch crosses whatever internal threshold they've set, a notice gets generated under Section 133(6). This notice appears on the Compliance Portal (not the regular e-Filing portal, different one). You'll also get an email and SMS alert. The notice has a DIN Document Identification Number—which you can verify on the e-Filing portal to make sure it's legit and not some phishing attempt.

Then it's your move. You've got typically 15 to 30 days to respond through the Compliance Portal. You can say the AIS info is correct and you missed reporting it. Or you can say the AIS info itself is wrong and provide evidence. Or maybe the income was reported but under a different head in your return. Whatever the situation is, you explain it online.

Finally, the department reviews your response. If they're satisfied, matter closed, nothing more happens. If your explanation doesn't cut it, they might suggest filing an Updated Return (that's Section 139(8A), which lets you correct your return by paying additional tax plus a penalty). If the issue seems serious, they could start actual reassessment proceedings.

That's the five-step cycle. Most cases get resolved at the response stage if the explanation is reasonable and documented.

About the Annual Information Statement

AIS replaced the old Form 26AS a few years back. It's way more comprehensive—shows your TDS, tax payments you made, interest from banks, dividends, share transactions, mutual fund redemptions, property deals, foreign money transfers, large cash deposits, even your GST turnover if you're running a business.

You can see your own AIS anytime. Just log into the e-Filing portal, go to Services, then Annual Information Statement, pick the year you want, and there it is. Everything third parties have reported about you.

Here's the thing AIS isn't always accurate. Banks make data entry errors. Sometimes transactions get reported twice. Maybe a sale shows up but the corresponding purchase doesn't, making gains look inflated. That's why there's a feedback mechanism right there in AIS. If you spot something wrong, mark it as incorrect and explain why. The department takes that into account.

Smart move is checking your AIS before filing your return every year. Saves surprises later.

What Those Section 133(6) Notices Look Like

When a notice lands, it'll have the DIN (that's how you know it's real), details about what doesn't match, where the information came from, how much is involved, what you need to do, deadline for responding (usually 15-30 days), and what happens if you don't respond.

Before doing anything, verify the DIN. Go to the e-Filing portal, find the "Verify Statutory Regulatory Compliance" option under Services, punch in the DIN from the notice. System will tell you if it's genuine. This matters because fake notices exist people trying to phish information or money.

Authentic notice, verified DIN now you know it's for real and you need to deal with it.

How to Actually Respond to the Notice

This part is entirely online. No office visits, no hearings, nothing physical. Everything happens through the Compliance Portal—that's compliance.incometax.gov.in, different from the regular e-Filing site.

Log in there with the same credentials you use for e-Filing. Navigate to the e-Verification tab where these notices show up. Click on the one that applies to you, read through what they're asking about.

Now prepare your response. The portal gives you options you can agree that the information is correct and you missed it, disagree and say the AIS data is wrong, explain that you did include it but under a different category, or claim it doesn't apply to you at all.

Whatever you choose, back it up with documents. The system lets you upload up to 10 files, 10 MB each. Bank statements showing the actual transaction, purchase and sale agreements for property or shares, detailed computation sheets if it's about capital gains, any correspondence with the reporting entity if there's been an error, exemption certificates if the income was tax-exempt.

Submit the whole thing before the deadline. Then you can track status on the same portal to see if the department has reviewed it and what they concluded.

The entire process is designed to be faceless and contactless. No calling anyone, no meetings, no physical submissions.

The Updated Return Route: Section 139(8A)

Sometimes you look at the notice and realize, yeah, that income should have been in my return and I genuinely missed it. Happens. In that case, Section 139(8A) lets you file what's called an Updated Return.

Catch is, you pay extra. The additional tax itself plus either 25% on top (if you're filing within 12 months of the assessment year ending) or 50% on top (if it's been 12-24 months). Plus interest for the delay.

Quick example. Say it's for Assessment Year 2023-24, which ended March 31, 2024. You've got till March 31, 2026 to file an Updated Return for that year.

Your original return showed ₹8 lakh income. You discover you missed ₹2 lakh interest income. Tax on that ₹2 lakh at 30% bracket would be ₹60,000. If you file the Updated Return within 12 months (before March 31, 2025), you'd pay ₹60,000 plus 25% of ₹60,000, which is ₹75,000 total additional tax. If you file between 12-24 months, add 50% instead, making it ₹90,000. Plus interest under Sections 234A/B/C on top of that.

Sounds like a lot, but it beats reassessment proceedings where penalties could be even harsher. Filing an Updated Return after getting a Section 133(6) notice often stops the matter from escalating further.

What Happens If You Just Ignore the Notice

Don't. Seriously, don't ignore these notices. Yeah, it's tempting to think maybe it'll just go away or they'll forget. They won't.

Ignoring it means the issue stays open on your file—red flag territory. The information that triggered the notice doesn't disappear; it becomes ammunition for reassessment later. They can send a Section 148 notice (that's for income escaping assessment) and start formal proceedings. Or they might do a best judgment assessment, which usually doesn't favor the taxpayer. Penalties under Section 270A for underreporting or misreporting can kick in. Interest keeps building from way back when the tax was originally due.

Long term, you're marked as non-responsive. Affects your compliance rating. Makes future refund claims harder. Increases chances of scrutiny in coming years. Just not worth it.

The notice is giving you an early chance to sort things out before they become a bigger problem. Use that opportunity.

Common Mismatch Situations

1. Interest from banks: AIS shows ₹1.5 lakh, your return shows ₹1.2 lakh. Could be timing—bank credited interest in April but you accounted for it in March. Or different accounting methods (accrual vs receipt basis). Or you just forgot one savings account existed.
2. Resolution depends on facts. If it's timing, explain that with bank statements. If you genuinely forgot an account, time to file Updated Return.
3. Share sales: AIS shows you sold shares worth ₹10 lakh but your return has no capital gains section filled.
4. Might be the sale resulted in a loss which you didn't bother reporting. Or it was long-term equity with STT paid, so gains were exempt—but you should've still shown it in the exempt income section. Or you bought the shares years ago, cost basis was high, indexed cost brought gains down close to zero.
5. Whatever it is, show the complete picture—purchase price, sale price, whether STT was paid, whether short-term or long-term, the final gain or loss figure. Back it up with contract notes and demat statements.
6. Multiple salary sources: AIS shows salary from two employers totaling ₹12 lakh. Your return shows just one employer at ₹7 lakh.
7. Classic job change situation. You worked at Company A for half the year, Company B for the other half. One Form 16 got filed properly, the other you lost track of or it arrived late. Or maybe the second income was consultancy work you reported under business income instead of salary.
8. Fix it by providing both Form 16s with employment dates, or showing where the second income was reported if it's a classification issue.

How to Stay Out of Trouble

Look, the best defense here is prevention. Check your AIS before filing your return every year—not after, before. That way you know what the department knows about you, and you can make sure your return matches or you can flag errors in the AIS itself using the feedback mechanism.

Keep your documents. Seven years minimum. Every bank statement, every contract note, every Form 16, every property agreement. Digital copies work fine, just make sure they're somewhere you can access them if needed.

When you file your return, reconcile it properly against your AIS. That interest from Bank of Baroda that's in AIS—did you put it in your return? That dividend from the mutual fund—is it there? Takes an extra hour maybe, but saves headaches later.

Keep checking the Compliance Portal once in a while. Don't wait for an email or SMS alert that might end up in spam. Just log in quarterly and see if anything's there.

Make absolutely sure your email and phone number on the e-Filing portal are current. Otherwise you might miss the notice entirely, deadline passes, and you're in default without even knowing a notice existed.

If you get a notice, respond quickly. Don't wait till day 29 of a 30-day deadline. Things take time to gather and explain properly.

And if the situation is complex—significant amounts involved, complicated transactions, multiple sources of confusion talk to a CA. Spending a few thousand rupees on professional advice beats paying lakhs in penalties and interest because you tried to wing it and got it wrong.

Conclusion

The e-Verification Scheme has been running for over four years now. It's not going anywhere in fact, it's getting more sophisticated as more data sources plug into the system. Every year the department's information about financial transactions gets more comprehensive and the matching algorithms get smarter.

For most taxpayers, if you're reporting everything honestly, this scheme is actually helpful. It catches genuine errors before they become problems. That bank interest you forgot about? The scheme flags it, you file an Updated Return, pay a bit extra, move on. Better than discovering it three years later during reassessment with higher penalties.

The key word here is preliminary. This isn't assessment, it's not prosecution, it's not even an accusation. It's verification. Hey, we have this information, you filed something different, can you explain the difference? That's the question being asked.

Most mismatches have innocent explanations timing differences, classification issues, reporting errors by banks or employers, things getting lost in translation between different financial statements. Respond properly, provide documentation, and the matter usually resolves.

The system is designed to work online, to be faceless, to give taxpayers a fair shot at explaining before things get serious. Taking advantage of that opportunity that's what compliance looks like in 2026.

Book a free tax assessment call with us now!

Frequently Asked Questions

Q1: Received a Section 133(6) notice but the AIS information is genuinely incorrect. The reporting bank confirmed it was a data entry error. What should be done?

Respond on the Compliance Portal explaining that the reporting entity has acknowledged the error. Attach written confirmation from the bank (email or letter on letterhead) stating the mistake and that they will file a correction statement. Also mention that the reporting entity is in the process of correcting their records. The Income Tax Department will verify with the source and, once corrected data is filed by the reporting entity, your AIS will automatically update, and the matter will be closed. Keep following up with both the reporting entity and the Compliance Portal until the issue is fully resolved.

Q2: The notice mentions income already included in the ITR but under a different head. For example, AIS shows consultancy income as "professional fees" but it was reported under "business income." How to respond?

Clearly state in your Compliance Portal response that the income has been duly reported in your ITR but under a different head. Provide the specific ITR schedule and line item where it appears (for example, "reported in Schedule BP under presumptive taxation Section 44ADA"). Attach a copy of the relevant ITR page showing the income. Explain the legitimate reason for classification—consultancy income can validly be reported under business income if it doesn't constitute independent professional services. Most such cases get resolved quickly once the department sees the income was reported, just differently classified.

Q3: Can the e-Verification Scheme 2021 lead directly to penalty proceedings, or will there always be an opportunity to file an Updated Return first?

The scheme itself is a preliminary verification mechanism and doesn't directly impose penalties. However, the sequence depends on your response. If you acknowledge the missed income and file an Updated Return (ITR-U) promptly, you pay the additional tax plus 25%/50% extra tax (not technically a "penalty" but additional tax). This typically prevents formal assessment proceedings. If you don't respond or provide an unsatisfactory explanation, the department may initiate reassessment under Section 148. During reassessment, if underreporting or misreporting is established, penalties under Section 270A can apply (50%-200% of tax on underreported income). The e-Verification Scheme gives you an early exit option before things escalate.

Q4: Received notice for AY 2020-21 in January 2026. Can an Updated Return still be filed, or is it too late?

For AY 2020-21 (FY 2019-20), the assessment year ended March 31, 2021. Updated Return under Section 139(8A) can be filed within 24 months from the end of the relevant assessment year. That deadline would be March 31, 2023. Since it's now January 2026, the 24-month window has expired, and ITR-U can no longer be filed for AY 2020-21. However, you can still respond to the Section 133(6) notice explaining the situation. If the income was genuinely missed, the department may proceed with reassessment under Section 148 (as the time limit for reassessment for AY 2020-21 extends up to 3 years or 10 years depending on amount). You lose the option to voluntarily declare and close the matter through ITR-U.

Q5: Notice states there's a mismatch, but the taxpayer has already filed a revised return after the original return which included the missing income. Will the notice automatically get withdrawn?

Not automatically. The notice was likely generated based on the original return data before the revised return was processed. You should respond on the Compliance Portal explaining that a revised return has already been filed (mention the revised return acknowledgement number and date) which includes the income in question. Attach a copy of the revised ITR acknowledgement and the relevant schedule showing the income. The department will verify that the revised return indeed contains the information, and the matter will be closed. Always respond even if you believe the issue is already addressed silence can lead to the department proceeding based on outdated information. The verification process confirms your revised return has been noted.