Have you received any Notice from Income Tax Department? If yes, don’t get panic. Read the complete article to know what is the reason and how to deal with Income Tax Notice.
What is the reason to get Income Tax Notice?
The scariest word for many of us regarding Tax is Income Tax Notice. The reasons may vary for attracting the Notice. Such reasons include Not filing income tax returns, TDS errors, Not Reporting Additional Income, High-Value Transaction, Investment on the name of Spouse or Kid, etc.
Non-filing of Income Tax Return Notice
- As per Income Tax law, if your gross total income is above the exempted limit of Rs. 2.5 Lakhs for individuals, Rs. 3 Lakhs for Senior Citizens aged 60-80 years and Rs. 5 lakhs for super seniors aged above 80 years, then you are liable to file an Income Tax Return.
- Also, in case your employer has deducted the tax at source, irrespective of that fact you have to file an Income Tax Return.
- You need to file a return even though you don’t have a tax refund to claim.
On failure of any of the above case, you will get an Income Tax Notice from IT Department. You have to respond to such notice otherwise, you may get penalized.
If the TDS deposited by your employer and the income tax return filed by you are different then you may get an Income Tax Notice. Before filing the IT return you have to check your Tax credit statement Form 26AS online. The difference in TDS amount in the Form 26AS may be due to wrong TDS has been credited to your account by your employer or the TDS amount has been credited to a wrong PAN.
Hiding interest income / Not Reporting Additional Income
If you have not declared the interest income from your Fixed Deposits, Saving Account, and recurring deposits in the Income Tax Return, then it may result in a Tax Notice. Many people don’t include such interests knowingly or unknowingly.
The interest from saving account up to Rs. 10,000 is deductible under section 80TTA. The interest on recurring deposits and fixed deposits is fully taxable. If the interest income exceeds Rs. 10,000 in a financial year, then the TDS will be deducted in case of recurring deposits and fixed deposits. The interest may be taxable or may not be taxable. Irrespective of that, you have to include all your interest income in your Income Tax Return. If you fail to do so you may get an Income Tax Notice.
Non-Disclosure of Capital Gain
If you forgot to mention the details about the Capital Gain that you have made by selling property/stocks in the Income Tax Return, then you may get the Income Tax Notice from the IT Department.
Mismatch or concealment of income / Review of Documents
If the income declared in your tax return differ from your actual income, investments or expenditure, then you may get the Notice under Section 143(3) or Section 143(7). In such notice, you would be asked to provide documents and clarifications for re-calculating your Income.
Defective income tax return
While filing Income Tax Return, you should be careful. If there are any errors found by Income Tax authorities they can issue an Income Tax Notice to you under the Section 139(9). You would be asked to file a revised income tax return after correcting the error.
Investment in the name of Spouse or Kid
If you have invested money in the name of Children, Spouse or even parents and not included such details in income tax return, then you may get an Income Tax Return. Even if the investments are in someone else’s name, you have to mention that in the Income Tax Return because of the Clubbing of Income provision in the Income Tax Act. If you fail to do so, then the Tax Notice will be given to the person in whose name you have invested.
High Value Transaction
All the high-value transaction made by you will be monitored by IT department. If there is any mismatch in this transaction and your income, then you can get the Income Tax Notice. The high-value transactions that are monitored are as follows.
- Credit card purchases of Rs. 2 Lakh or above in a year.
- Cash Deposit in Bank of Rs. 10 Lakh or above.
- Mutual Funds Investment of Rs. 2 Lakh or above in a year.
- Purchase of shares of Rs. 1 Lakh or above.
- Purchase of Bond or Debenture of Rs. 5 Lakh or above in a year.
- Sale or purchase of property value of Rs. 30 Lakh or more.
How to deal with Income Tax Notice?
If you have received any Notice from Income Tax Department, don’t get panic and find the reply to Income Tax Notice in this section. Just follow the steps given below to deal with the Income Tax Notice.
- Read the Notice Carefully and understand what exactly the taxman (an inspector or collector of taxes) is trying to tell you.
- Verify the details like your Name, PAN Number and also check whether the notice is for this year or previous year.
- Find the reason behind the arrival of Income Tax Notice. You can check the reason through online from incometaxindiaefiling.gov.in – Click Here to check.
- Based on the reason respond to the notice.
Some of the actions you may need to perform are as follows.
- Respond to the notice, and furnish the information and documents the IT department has asked.
- File a rectified Income Tax Return and pay the tax due (if any) within the specified period.
- In some cases, Income tax officials may ask you to meet in person for checking returns filed by you. In such case, you can either authorize a tax expert or represent your case yourself. The option of authorizing a tax expert is better because as a professional he will understand each and every explanation asked by the officials and respond appropriately.
Note: If you haven’t responded to the notice, it could cost you a lot of money, time, and peace of mind. In some cases, it may also lead to the imprisonment.