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  • How to reply to different Income Tax Notices

    The Income Tax Department can send notices under several sections of the Income Tax Act if any discrepancy is found in your Income Tax Returns (ITR). With the new stringent regime and quick turnaround time in the department, many people have been getting notices. The I-T Department could send you notices either by post or email. These notices could be for scrutiny, non-filing, delayed filing or filing of defective ITR, non-disclosure of income, tax credit mismatch in the ITR, or non-payment of Self Assessment Tax. Let us look at each kind of notice in detail and find out how to reply to each kind.

    Notice for Non-Filing of Income Tax Return:

    If you have filed ITR for one year and not filed in the following year, or you have performed high-value transactions and not filed an ITR, then you could get a notice from the I-T Department for non-filing of ITR. If you are a salaried individual with tax being deducted by the company, and you have failed to file the ITR, then you could get a notice from the I-T Department.

    If you have received a mail from the Income Tax Department by post, then you need to reply to the authority that sent the notice, giving detailed reasons for not filing the ITR.

    • If you did not file ITR because your income was below the taxable limit, then mention this in the letter. However, as a best practice, it is better to file an ITR eve if your income was below the limit, especially if you have filed returns in the previous years.
    • Anyone performing financial transactions above a certain limit have to file an ITR. The I-T Department gets information about such high-value transactions through the Annual Information Return (AIR). The relevant high-value transactions in a fiscal year include:
      • Cash deposit of Rs. 10 lakh or more in a savings account
      • Credit card bill payments of Rs. 2 lakh or more
      • Purchase of mutual funds worth Rs. 2 lakh or more
      • Buying or selling immovable property worth Rs. 30 lakh or more
    • Even if you incurred a loss in these transactions or if any of it was a gift of any kind, an ITR needs to be filed. In your reply to the notice, you must specify the reasons you thought you didn’t need to file an ITR. If you made the wrong assumption, then you may file the ITR if the deadline for the assessment year is not already over – in your reply, you can attach the ITR-V/acknowledgement. If there is no time to file a return, then you must attach with your reply a computation of the income and investments and prove that there is no tax due. If tax is due, you may have to pay penalty.
    • If you are a salaried person and your employer deducts TDS from your salary, then it does not mean that you are exempt from filing return. Tax is deducted from your income when your income exceeds the income tax limits, which means that you are liable to file income tax return irrespective of whether the tax has been deducted from your salary or not. If you are in time for filing the return, then you should file the ITR and attach the ITR-V/acknowledgement with your reply to the authority. If the deadline for filing ITR has passed, then you need to attach a calculation of your income and investments to prove that you have not evaded tax payment.

    If you received the I-T notice on mail, then you can reply to it online. Log in to the Income Tax e-Filing website and go to the Compliance section and locate the notice. You can respond with one of the following replies available:

    • Return is filed
    • Return under preparation
    • Business has been closed
    • No taxable income
    • Others

    Once the relevant option is chosen, go to ‘Related Information Summary’ and fill in the appropriate options.

    Notice for Delayed ITR Filing:

    If you have not filed the Income Tax Return by July 31, you will get a notice on non-filing of ITR. You could get this notice within a year of the end of the assessment year for which return has not been filed. File your ITR as soon as possible and attach the ITR-V, or reply with ‘Return under preparation’.

    Notice for Non-Disclosure of Income:

    You can get a notice from the I-T Department for non-disclosure of income if you have not shown any income in your ITR. If TDS has been deducted and you have no income to show for it, or if the I-T Department has received information about income such as bank interest or income from shares and securities through the AIR, they will suspect you of hiding income sources and send you a notice.

    • Always remember to compare your ITR with Form 26AS before filing it.
    • File a revised return in case you accidentally omitted any income source which is mentioned in Form 26AS.
    • If the return-filing deadline is over, then you need to send the department a fresh calculation of your income and tax dues. If any tax is due to the government then you need to pay it along with the interest and penalty applicable, and a receipt or challan of the tax paid can be attached to your reply.

    Notice for Tax Credit Mismatch:

    If the tax credit in the ITR and Form 26AS do not match, you are likely to receive a notice for tax credit mismatch. In this case, cross-check the tax credit details in your TDS and ITR with that in Form 26AS. Revise your ITR accordingly and file a revised version or a rectification. If there is any error in Form 26AS, you need to rectify it in the form first.

    Notice for Non-Payment of Self Assessment Tax:

    If you have filed a return even when tax is due from you to the government, then the ITR you filed will be considered a defective return. In this case, make the tax payment as required and file a revised return.

    Notice Under Section 142(1):

    This is a notice sent before the I-T Department begins scrutiny of your tax payment. As a preliminary investigation, the department asks the taxpayer to produce details on income, investments, tax paid, assets and liabilities. You may be asked to produce tax and income details of yourself and anyone you are liable to pay tax for – for example a ward or a deceased person of who you are the legal heir. If the Assessing Officer is satisfied with the documents and information furnished, then he might decide to not scrutinise your case. Even if you think the details sought are not relevant to you, you need to respond to the notice under Section 142(1), or face penalties and even prosecution.

    Notice Under Section 143(2):

    This is a scrutiny notice that is usually served after a notice under Section 142(1) is sent out. You could receive this notice up to 6 months after the end of the assessment year. Receipt of this notice means that your case has been chosen for detailed investigation, and you need to furnish all relevant financial documents – income, investments, exemptions and deductions availed, losses, etc. To avoid penalties and prosecution, you need to reply to this notice as soon as possible. It may be better to consult a tax expert before replying to this notice.

    Notice Under Section 245:

    You are served a notice under Section 245 if you have claimed refund on the tax paid, but there are previous dues n your name. Through this notice, the department lets you know the refund you have claimed, the pending demands from the previous years. If you do not respond to this notice, the dues and refunds will be adjusted against each other. If there is any discrepancy, you may need to file rectification or revision of return. If you have any rectification on the previous demands, you need to respond with the steps taken to correct the errors in the previous ITRs, and the reason why you should be paid the refund.

    Notice Under Section 139(9):

    If there is an error in the ITR filed by you or any relevant income/investment proof has not been attached, the department will send you a notice under Section 139(9). You need to reply to this notice within 15 days or the return will be considered as not filed. If any rectification needs to be done, file a rectification request for the return or a revised return within the deadline. If the rectification or revision is done within the stipulated period, then the return will be considered as filed, but if you have missed the deadline for filing ITR for the given year then the return will be considered as not filed.

    The first thing to remember when you get a notice from the Income Tax Department is to not panic. If you are not clear on how to respond, seek the help of a tax consultant. Be truthful in your replies and attach as many documental proofs as you can. If any ITR revisions need to be done, do it as soon as possible. It’ll be easier to deal with Income Tax Notices if your original ITR is filed online, so move to online ITR filing as soon as you can. 

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