Receiving an income tax notice isn’t necessarily a cause for alarm. Often, it is just a request for additional details or clarification on your tax returns. Common triggers include inaccurate income reporting, unreported tax-saving investments, or errors in claiming tax benefits.
Being aware of the different types of tax notices can help you stay compliant and avoid unnecessary penalties.
What is an Income Tax Notice?
An income tax notice is an official communication from the tax department highlighting discrepancies, missing information, overdue filings, or unreported income, and can be issued regardless of whether returns have been filed.
The notices are issued under specific sections of the Income Tax Act, requiring timely action to avoid penalties or legal consequences. These notices may be sent for various reasons, including non-filing of returns, a mismatch in reported income, verification of claims, or a demand for outstanding tax, and it is essential to respond promptly to avoid further complications.
Types of Notices/Intimations
- Intimation under Section 142(1): This notice is issued when the assessing officer requires additional information or documents to support your claims. It can be issued in two circumstances: if you’ve filed your return but need to provide more information, or if you haven’t filed your return and need to do so.
- Income Tax Notice under Section 133(6): This notice is issued to require explanations or documentation from the assessee. The reasons for such a notice may include not filing ITR despite having income exceeding the basic exemption limit, taxable income not reported correctly in the ITR form, or significantly higher expenditure compared to income declared.
- Intimation under Section 143(1): This intimation is issued after your return has been electronically processed by the Central Processing Centre (CPC). This notice notifies you whether the tax department’s computation of your income tax matches what you stated on your ITR. This is a preliminary assessment, often known as a summary assessment, that does not include a detailed review.
- Income Tax Notice under Section 143(2): This notice is issued when the assessing officer is not satisfied with the response provided under section 143(1), or no response is provided. This notice may ask you for the profit of tax deductions and exemptions claimed, as well as further information about the profits computed, allowing the officer to perform a more thorough investigation.
- Income Tax Notice under Section 148: This section empowers the Assessing Officer to issue a notice to a taxpayer for income escaping assessment. This can happen if the officer believes the taxpayer hasn’t disclosed their complete income or has provided inaccurate information. The notice can be issued regardless of whether the taxpayer has previously filed returns or undergone an assessment.
- Intimation under Section 245: This intimation is issued when you have a refund due for a given financial year and an outstanding tax demand for a different financial year. Section 245 empowers the assessing officer to adjust the refund (or part of it) against the pending tax demand. Essentially, the income tax department wants to set off the refund against the outstanding demand, which may pertain to an earlier assessment year.
- Notice Under Section 156: After the assessing officer completes the assessment, an assessment order is passed determining the tax, interest, and penalty payable. If an amount is recoverable from the assessee, the assessment order is sent along with a demand notice.
- Notice Under Section 139(9): Under Section 139(9), the department issues a notice for a defective return. A defective return happens when the Income Tax Department discovers flaws or discrepancies in a filed income tax return. The purpose of this notice is to provide you an opportunity to correct these errors and ensure that your ITR has accurate and complete information.
What to do when you receive an Income Tax Notice?
- Read carefully: Read the notice carefully and understand the reason for which it has been issued.
- Verify authenticity: Check the notice’s authenticity on the Income Tax Portal.
- Gather documents: Collect relevant records, such as Form 16, bank statements, and investment proofs.
- View notice online: Log in to your Income Tax Portal and check the notice under “Pending Action” > “e-Proceedings”.
- Prepare response: Write a clear explanation and attach supporting documents.
- Submit reply: Respond online through the portal and save the acknowledgement ID or receipt for further reference.
- Track further communications: Monitor the portal and email for updates from the Income Tax Department.
Source from: https://www.cnbctv18.com/personal-finance/types-of-tax-notices-one-can-receive-and-how-to-act-19768722.htm
