Received an income tax notice? Here’s how to respond to it

Making errors while filing your Income Tax Returns (ITR) is quite common. In such cases, the income tax department sends notices for rectifying these mistakes. Now, income tax notices are issued for various reasons, and each needs to be addressed differently.

You may receive income tax notices through post or email; however, you need to follow a certain approach while responding to these notices. These notices can appear in your mail for various reasons, including delayed or non-filing of an ITR, non-payment of self-assessment tax, non-disclosure of income, or for simple scrutiny. Let’s dive into the details of various income tax notices and how to respond to them.

Income tax notice for non-filing of tax returns
 

If you are employed and your company deducts your taxes, you need to file an ITR. When you fail to do so, you may receive an IT notice. In case you have filed ITR for a year and missed it for the following year, the IT department will send you a notice. Individuals failing to file taxes can receive tax notices under Section 139(9), 143(1), 143(2), 143(3),245,144, 147, and 148 of the Income Tax Act, 1961.

Here are some of the most common reasons why some people avoid filing tax returns:

· Income below the taxable limit –
 

Some individuals might not file an ITR if they have income below taxable limits. If that’s the case, you need to reply to the notice mentioning the same reason. It is advisable to file your ITR on time even if your salary is within the taxable limit.

· Missing out reporting due to financial loss –
 

Even if you experience losses on any kind of investment or have received funds as a form of gift etc., you need to file an income tax return and also specify the reason. If you are within the ITR filing deadline, you can produce your income and investment proof along with an acknowledgement letter. However, if you have any tax due, you may need to pay a penalty.  

· Non-filing due to TDS (Tax Deducted at Source) –
 

If you are a salaried individual and your company deducts your TDS, you still need to file an ITR. Again, if you are within the ITR filing deadline, you can produce your calculation of income and investment proof along with an acknowledgement letter. However, for the exceeded deadline, you need to reply with an income calculation and investment proof to prove that you have not evaded any taxes.

Do keep in mind that the IT department also keeps an eye on high-value transactions like bulk deposits, credit bill payments etc. through the annual information report. So, make sure to be clear on all these transactions while filing for ITR. Some of these transactions include:

o   Savings account deposit of ₹10 lakhs or more

o   Credit card bill payment of ₹1 lakh or above (in cash) or Rs 10 lakhs or above (other than cash)

o   Buying or selling properties worth ₹30 lakh or more

o   Investing in mutual funds worth ₹10 lakh or above

Please note that the limits stated above are aggregate limits during the financial year.
 

If you receive an ITR notice via email, you can reply to it online by logging onto the income tax e-filling website. Visit the compliance section, find your notice, and choose from one of the reasons for non-filing that are mentioned on the portal.

Income tax notice for delayed ITR filing

If you have failed to file an ITR within the deadline i.e., 31^st of July, you are likely to receive a notice for not filing your ITR. You must file your income tax returns as soon as possible along with an ITR acknowledgement.

Income tax notice for credit mismatch

In case your tax credit and Form 26AS in the ITR do not match, you will receive an IT notice. Verify your tax credits in the TDS and ITR with that on Form 26AS and rectify them in case of any discrepancies. Update your income tax return details accordingly and file a revised version.

Income tax notice for non-disclosure of income

You may also get a notice for not disclosing your income. There are several sources for them to find out such as bank interest, tax deductions, and annual information returns. Verify your income calculation through various sources and compare it with Form 26AS. In case you missed out on any income sources, update your ITR and re-file an updated version.

In case you have missed the deadline and owe any taxes to the government, you need to revise your income tax return filing and also pay the tax along with an interest or penalty as per the applicable laws.

If you have a bank account with IDFC FIRST Bank, you can complete your online tax payment with just your online banking login and transaction password. Taxpayers also have the option of making service tax payments through IDFC’s portal, enabling easy management of their business-related payments. 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.