Dirty data shocks Indian taxpayers with huge bills

India's income tax collection efforts hit a snag this week when it was found that an automated data feed somehow added an extra two zeroes to the value of taxable transactions, resulting in the issuance of notices to individuals that wrongly overstated their tax liabilities.

The error meant ₹100 (US$1.20) became ₹10,000 (US$120). That hundredfold leap saw many people who should not have tax liabilities sent a bill – with only five days' notice to pay up.

India requires those whose annual incomes exceed ₹10,000 to pay tax in advance, with a deadline of March 15, 2024. Penalty interest is imposed on late advance tax payments.

The mess, therefore, alarmed many.

Income Tax India took to Twitter/X to explain the error.

"Based on feedback from taxpayers on the e-campaign for Advance Tax, the Department has identified certain inconsistencies in the data of the securities market (SFT-17) provided by one of the Reporting Entities," stated the government org. "The reporting entity has been asked to submit a revised statement based on updated information."

It advised taxpayers to wait for further updates.

The identity of the misreporting entity remains a mystery – but whoever it is provided dirty data.

According to one Indian tax consultant, Chirag Chauhan, inaccurate info was sent to those who have sold shares or immovable property.

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According to local media, India's tax agency launched an online campaign on Sunday to communicate discrepancies in filing.

India has historically struggled with tax compliance, as its informal and cash-based economy makes it hard to collect. A complex tax system doesn’t help, either.

Pre-populated input of tax liabilities was intended to aid in increasing compliance. However, even those who wish to comply may be left scrambling to figure out how much to pay. And errors like this are unlikely to instil confidence in those who were reluctant. ®