Everything you need to know about Income Tax Notices

An income tax notice is a legal document sent by the Income Tax Department to an assessee when there is a discrepancy, error or doubt related to their tax returns and tax payments. Receiving an income tax notice can be stressful, but it is important to not panic. Understanding what the notice means and your next steps is crucial. This blog examines what an income tax notice is, the reasons you may receive one and the different types of income tax notices in India.

Income Tax Notice: Overview

An income tax notice is a formal communication sent to taxpayers by the Income Tax Department when they need additional information or clarification. There are a few reasons why you may receive such a notice:

• If you have not filed your tax returns on time or at all, you may get a notice asking you to file the returns immediately and explain the delay.
  
• If there is a mismatch between the income you have declared in your tax returns and the income visible from your salary slips, bank account, investments, etc., you may receive a notice seeking an explanation for the mismatch.
  
• If you have made any errors in calculating the tax liability, paid lower taxes than required, or missed declaring any source of income, you may receive a notice asking you to pay additional taxes.
  
• You may be asked to explain such claims or revise your returns if you have claimed deductions that are found invalid or are higher than permissible limits.
  

The notice will typically mention the specific section of the Income Tax Act under which it has been issued. It will provide details about the discrepancy identified by the department and the documents/information required from you for further verification.

Income Tax Notice Types in India 

The Income Tax Act of 1961 has various provisions for issuing different types of notices. Here are some key types of income tax notice for salaried employees that they should know about:

1. Intimation Under Section 143(1): This is the most common notice referred to as ‘Intimation u/s 143(1)’. It is a preliminary notice sent after processing returns. It could mean:

• Tax calculation matches department records – no action is needed
  
• Excess tax was paid – refund will be issued with interest
  
• Tax underpaid – outstanding tax to be paid with interest
  

2. Notice Under Section 143(2) and 143(3): A notice u/s 143(2) is for scrutiny assessment u/s 143(3) to verify income details, tax payment, losses claimed, etc. If discrepancies arise, another notice may be sent u/s 156.
   
3. Demand Notices Under Section 156: These notices demand payment of due taxes, interest, and penalties by a specific date.
   
4. Notice Under Section 142(1): Sent for clarification or additional documents related to filed returns. It can be for belated filing, income mismatch, etc.
   
5. Notice Under Section 139(9): Termed ‘defective return’ notice, it highlights errors in ITR like calculation mistakes, incorrect info, etc. Revised returns are to be filed within 15 days generally.
   
6. Notice Under Section 148: Sent if income has escaped assessment in previous returns. Asks for income details and documents again for a specific year.
   
7. Summons Notice Under Section 131: Orders appearance for inquiry, examination, and verification of documents. Non-compliance can lead to legal action.
   
8. Intimation Under Section 245: Seeks confirmation to adjust refund with tax dues pending for previous years. Must respond within 30 days.

Also Read: Income Tax Deductions in India

What to do When You Receive an Income Tax Notice?

Here are some tips on responding to an income tax notice:

• Do not panic or ignore the notice, which can lead to more penalties.
• Carefully read the notice details and legal section quoted. 
• Check what documents need to be submitted.
• Contact your tax advisor or chartered accountant immediately.
• Start collating all relevant documents and financial statements related to the assessment year.
• Send detailed written replies within the stipulated response time. 
• Provide authentic supporting documents.
• Be cooperative and transparent in all communication with the I-T Department.
• In case of errors in your ITR, file revised returns immediately.
• Attend hearings whenever summoned by the assessing officer.

Conclusion

Receiving an income tax notice need not be a scary affair if you understand what each notice means and respond with full cooperation. Being organised with your financial documents and seeking expert help when needed can resolve such cases smoothly. Ensure you file accurate returns every year and keep your paperwork in order. This will minimise the likelihood of getting an income tax notice in future!

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FAQs 

I was late in filing my ITR this year. Will I receive an income tax notice?

Yes, you will likely receive an income tax department notice under Section 139(9) or 142(1) for late filing of returns. The notice will ask you to provide reasons for the delay and file your returns immediately, along with late filing fees, if applicable. Ensure you respond within the stipulated time.

How do I check if an income tax demand notice is real?

To verify an income tax demand notice is genuine, you can log in to the e-filing portal and check under ‘Pending Actions’ or call the jurisdictional assessing officer. Before proceeding, check for the correct PAN, assessment year, notice date, section mentioned, etc..

Within how many days do I need to respond to an income tax notice?

The time period to respond varies based on the type of notice. For notices under common sections like 139(9), 142(1) and 143(2), you typically get around 15 days. For Section 245 intimation, you get 30 days to respond. The tax demand notice under Section 156 will clearly specify the due date for payment. Not meeting the response timeline mentioned in the notice can attract penalties as per income tax rules. So ensure you act within the stipulated period.