A salaried filer served a mismatch notice over share sales

स्थिति

She had filed her own return each year using Form 16, on ITR-1, and had never thought about the mutual funds she redeemed to fund a house deposit. The AIS reported the redemptions, the return declared none of it, and a mismatch notice followed. Her immediate assumption was that she owed a large amount of tax and a penalty.

हमें क्या मिला

The redemptions were long-term equity gains of about ₹1,10,000, which fell under the ₹1,25,000 annual exemption — so the correct tax on them was nil. The real defect was procedural rather than financial: ITR-1 cannot report capital gains at all, so the return was on the wrong form. A second year had the same problem, undetected because no notice had issued for it yet.

हमने क्या किया

1. 1

   Pulled the AIS and the broker's statement for both years and computed the actual gains against grandfathered acquisition costs.

2. 2

   Established that the gains fell within the exemption and that no tax was payable for either year.

3. 3

   Filed a revised return for the open year on ITR-2, the correct form, declaring the gains and claiming the exemption.

4. 4

   Filed an updated return under section 139(8A) for the earlier year, before a notice could issue for it.

5. 5

   Responded to the notice through e-Proceedings with the computation attached.