Income tax is a form of direct tax levied by almost all governments in the world on an individual’s income. However, you are obligated to pay an income tax only when your income reaches a minimum threshold. The higher your income the higher is the tax deduction.

A tax notice often leaves taxpayers worried.  But an income tax notice can be sent to you if you miss an important deadline or have made an error in following a process.

Common reasons for income tax notice

  • TDS-Form 26AS mismatch:You can expect a tax notice at your doorsteps if your Tax Deducted at Source (TDS) amount does not tally with your Form 26 AS. There could be a mismatch for several reasons, especially if you have more than one source of income.In such a case, the I-T department may send you a notice under section 143 (1A).

How to deal with the income tax notice?

You can respond to this notice by explaining the reason for the mismatch, to begin with. For this, you log in to the ITR filing portal and then do the same. Besides, you will be required to submit valid documents supporting your explanations.

  • Section 143(1):  The I-T department can send you a notice under section 143(1) for non-disclosure of any income. If the department via its inquiry about your income from banks, financial institutions or say a mutual fund house finds that you have not disclosed the amounts from all sources, it can send you a notice on that basis.

How to deal with the income tax notice in that case?

As you are aware, income tax does not only include your salary. You must factor in your earnings from a property that you may have or capital gains from an investment. Besides, investment returns from fixed deposits also need to be declared while filing your Income Tax return.

You must also note that a discrepancy in your tax return makes you liable to pay an extra tax amount within 30 days. You can also reply to the notice with valid proof and explain any error that you made while filing your ITR details.

  • Section 143(2): A notice under section 143(2) means that the department is evaluating or checking your ITR. You are required to respond to such a notice within the prescribed time period. Therefore, you should keep all the documents ready for a response.
  • Section 139 (9):  Apart from this, you may receive a notice for incorrect ITR form. This is a common cause of attracting an income tax notice. For instance, you have multiple sources of income and you filed a return by selecting an incorrect ITR form, you will receive a notice under section 139 (9).

How to deal with the income tax notice?

The I-T department usually allows up to 15 days for a response in case of a notice under section 139(9). If you fail to respond within this duration, your return filing may be declared invalid.

Other reason for attracting a tax notice

Apart from the reasons listed above, you may find a notice at your doorsteps if you failed to declare the returns from a high-value transaction or reporting investment made in the name of your spouse.

Another common error on the part of the taxpayer to not mention the investment in the name of someone else. That transaction has to be mentioned in your filings too.

Usually the tax department closely scrutinises the individuals with a cash deposit of over 10 lakh or more in a year. Besides, a transaction of property worth over 30 lakh also attracts the attention of the I-T department, therefore, you must know what is income tax notice and how to deal with the income tax notice.

Conclusion:

Most Income-Tax notices require you to submit the additional data along with proof of investment. Besides you are required to explain the error on your part if any. It is therefore a good practise to understand the filing system properly and keep a record of all the investment you have done.