Income Tax Notice: What to Do & How to Handle?
For many taxpayers, getting an Income Tax Notice can be a sudden blowout. Getting a letter from the Income Tax Department may affect your lifestyle, whether you’re a salaried person, a freelancer, or the owner of a business. Don’t worry, as you can handle such notices and know the reasons why you received them firsthand. Knowing the different kinds of notices, why they are sent, and how to react to them can help you handle them with confidence and avoid unnecessary problems while ensuring smooth compliance.
Why do you get a notice about your income tax?
The Income Tax Department could send a warning for several reasons, from small errors to major problems. The following are some common triggers:
Mismatch in the income statement
The department may send you a letter to explain if the income you reported on Form 26AS, AIS (Annual Information Statement), or TIS (Taxpayer Information Summary) doesn’t match what you said on your ITR.
Deals with a lot of value
People who buy expensive things, like homes or cars, or who use their credit cards a lot may get extra attention from the tax department.
Not filing or filing tax returns late.
If you need to file an income tax return but don’t do so by the due date, you might get a warning.
Random examination or review
The department sometimes picks returns at random to be looked at. As per Section 143(2), this is known as a scrutiny warning.
Return with errors
Under Section 139(9), you may get a warning if your return is thought to be missing information or has mistakes.
Different Kinds of Tax Notices
Here are some of the most popular notices sent out under the Income Tax Act:
1. Notice under Section 143(1)
This is the most common note, and it’s usually made by itself. It’s a confirmation of your return that shows how much tax you owe, how much you can get back, or how much demand there is. It’s mostly useful for facts, but you should always check it for mistakes.
2. Notice under Section 139(9): Return That Is Not Correct
The tax office will send you this letter if they find that your return is wrong or missing information. Most of the time, you have 15 days to fix the return.
3. Notice under Section 143(2): Assessment Under Close Examination
This is a more important notice telling you that your return has been chosen for a more in-depth review. It could be because of mistakes, random checks, or certain alerts that the system raised.
4. A notice under Section 148: Income Not Assessed
The department can look into past years (up to 10 years in the worst cases) if they think you have under-reported your income or not paid enough taxes.
5. Notice under Section 245: Refunds Can Be Used to Pay Off Old Debts
If you still owe money from earlier years, the department can take that into account when calculating your current refund and let you know through this notice.
What to Do If You Get a Notice About Your Income Tax
Step 1: Don’t worry, just carefully read the warning
Know what section the notice comes from, what assessment year it pertains to, and what problem it raises.
Step 2: Look over your papers
Compare the information on the notice to your Form 16, Form 26AS, bank records, and the first ITR filing. This helps figure out why the warning was sent.
Step 3: Respond by the due date
Each warning gives you a certain amount of time to respond. If you don’t answer, you could face fines or legal action.
Step 4: If you need to, get help from a tax pro.
To avoid making mistakes, it is best to talk to a Chartered Accountant (CA) or tax expert about cases of scrutiny or reassessment. Talk to TaxDunia’s Tax Expert for further enquiries.
Step 5: If you need to, file a new tax return.
If the notice points out a real mistake, you can fix it by making a new return within the time limit.
How to keep from getting a tax notice
Even though you can’t always avoid being picked for close examination, here are some things you can do to make it less likely that someone will let you know:
- You must report all of your income, such as interest from savings accounts, fixed deposits, rental income, and capital gains.
- Before you file, make sure that Form 26AS, AIS, and TIS match up with your ITR.
- Disclose big deals that involve a lot of money, like investing in mutual funds, selling real estate, or depositing a lot of cash.
- On time, file your tax return and make sure it’s correct.
- Quickly answer messages, even if they’re just asking for clarification.
Get Started with TaxDunia
You do not have to panic about the income tax notice, as our professional team at TaxDunia handles notices and reaches out to authorities for compliance. Most of the time, it’s a normal process or a request for more information.Â
