Top 5 reasons you might receive income tax notice and here’s how to handle that

Top reasons why you should consider outsourcing the Payroll Process?
August 1, 2020
Importance of Compliance Management for Businesses in India
September 21, 2020

Top 5 reasons you might receive income tax notice

Receiving an intimation/notice from income tax department can be shocking for you. You may not be sure how to respond and manage the same. Above everything else, it is significant that you understand the difference between intimation and a notice. There is a dainty line of distinction between the two. Intimation is to outcome of the processing of your return or conclusion of assessment, and you may not be needed to respond on it (despite the fact that there are a couple of exemptions to it). Be that as it may, when you get a notice, it expects you to act on it.

You can get a tax notice for many reasons:

1) Delay in filing IT (Income tax) return:

If you have not filed your return by the deadline, you will receive a reminder notice from the income tax department. You get this notice before the end of the assessment year for which the return is due. To avoid getting notice you must file ITR before the deadline for filing ITR for a particular assessment year.

How to respond and manage such notice?
If you have missed the extended deadline date to file your income tax return (ITR), do not worry, you can still file your ITR. An income tax return filed after the due date is called a ‘Belated Return’. If someone fails to file ITR before the due date, as per section 139(4) of income tax act, the individual can file ‘belated tax return’. A belated return can be filed at any time before the end of the relevant assessment year or before completion of assessment, whichever is earlier.

2) TDS claimed not matching with Form 26AS/Notice under section 143(1):

When filing ITR, the TDS should ideally have to be the same in Form 26AS and Form 16 or 16A. However, there can be several reasons why some details may mismatch. Notice for TDS mismatch is issued under section 143(1).

How to respond and manage such notice?

    • Step-1: Please login to your income tax account at and click on the e-proceeding.
    • Step-2: Further you need to click on the “PROCEEDING”. You will be able to view a page with a submit link, click on the “Response” tab.
    • Step-3: Once you have clicked on the submit link, a page will get opened and it will highlight the difference between your total income based on the return filed by you and as per your Form 16/16A or 26AS.
    • Step-4: Now, you have to identify the exact reason behind the difference between your claims as per the return filed by you. You have to select whether you agree or disagree from the list as shown in the dropdown.
    • Step-5: If you do not agree to the addition then you need to mention the reason for your disagreement. You can select the reason from the given dropdown list and also submit the relevant documentary evidence in support of your claim.
3) For non-disclosure of income/defective return:

Revenue authorities have information about income of assesses from multiple sources like banks, employers, tenants, mutual exchange of information between countries etc. If you have not shown some income in your ITR, then you may get a notice from the income tax department if they detect the non-reportage. Notice is issued under section 139(9) or 143(1) for non-disclosure of income.

How to respond and manage such notice?
When you receive such notice/intimation, first verify the issue. Once you are aware of the problem then you can file the response accordingly to notice under section 139(9) by generating the xml file again and uploading in e-file tab in the income tax login under the heading e-file in response to notice u/s 139(9).

4) Not declaring investments made in the name of spouse/close relatives:

 Investing in the name of spouse, children or even parents is very common in India. But, they have to be mentioned in your ITR because of the income clubbing provision in the Income Tax Act. Failure to do so may invite a tax notice to the person in whose name you have invested. As per Section 64 of the Income Tax Act, any income from investment made or asset purchased in the name of close relatives is clubbed with the income of the person making the investment and taxed accordingly.

How to respond and manage such notice?

Well, you can always consider hiring a tax expert /tax consultant. But, in case you want to manage by yourself and respond to the notice, stay calm as it is not at all a panic situations. You need to gather the information and relevant documents Income Tax officers may want to verify. Keep the set of documents and if your documents are not faulty you are good to go. Do not avoid responding to the notice as it may cost you a lot of time and money. In bigger cases it could also lead to imprisonment.

5) Income Tax notice when you have done high-value transactions:

Here, High Value transactions are transactions which are incurred in high denominations. When you make high value transactions and do not mention in your ITR, you may receive a notice for the same and might ask you the source of funds.

How to avoid such situation?

People who do High-Value transactions are mostly in radar of Income-tax Departments. So you have to keep yourself informed about all these transactions and file return accordingly. Do not make cash transactions and ensure to save taxes legally.



Leave a Reply

Your email address will not be published. Required fields are marked *