Missing investment proofs that put salaried taxpayers on the taxman’s radar

In December 2025, several salaried taxpayers received emails and SMS alerts from the income tax department flagging discrepancies in deductions and exemptions claimed in their income tax returns (ITR).The alerts said certain claims did not match employer-reported salary data or other system records and needed revision.Most of the flagged cases involved returns where exemptions or deductions were claimed in the ITR but did not reflect in Form 16, said Nemin Shah, director at EQX Business Consultancy.If an employer deducted tax assuming fewer deductions, but the employee later claimed a larger set of exemptions directly in the return, it resulted in a refund of excess TDS. “Seeking a big refund results in the system likely taking notice and flagging it,” said Shah.This is where the annual investment declaration and proof-submission window with employers becomes critical.Every year, in January or February, employers ask employees to submit proof of investments and expenses declared at the start of the financial year.

Often treated as a routine HR exercise, this step plays a crucial role in how smoothly a tax return is processed later.“It is advisable to disclose all the exemptions and deductions to the employer so that everything is included in Form 16," Shah said. Once this is done, there is less chance of claims being flagged, and TDS gets adjusted accordingly, leaving little or no refund to be claimed.When proofs are submitted and verified, the employer factors eligible deductions and exemptions into payroll calculations and reflects them in Form 16.

Tax deducted at source (TDS) is adjusted accordingly. The final Form 16 then mirrors what you are likely to claim in your return.According to Himank Singla, partner at S B H