Under the latest provisions of the Finance Act, 2025, an income tax notice is a formal communication issued primarily to address data mismatches, scrutiny requirements, or non-filing. The Act emphasises ‘e-proceedings,’ where responses are submitted electronically. Timelines for reassessment (Section 148) and the ability to file an updated return (Section 139(8A)) have been refined to allow taxpayers up to 48 months to correct errors, provided no search or seizure has been initiated.
Example: A salaried taxpayer receives an automated email from the Income Tax Department regarding a mismatch in reported income.
- Authenticate the notice via DIN: The first step is to verify that the notice is genuine. Under the Finance Act 2025, every valid communication from the department must carry a unique document identification number (DIN). You can verify this on the e-filing portal’s home page under ‘Authenticate Notice/Order.’ If a notice lacks a DIN, it is legally invalid and can be treated as non-existent.
Example: A taxpayer enters the DIN number from the notice on the portal to confirm whether the communication is officially issued.
- Identify the relevant section: Carefully read the header to identify the section under which the notice is issued. Common sections include 143(1) (Intimation/Mismatch), 139(9) (Defective Return), or 148 (Income Escaping Assessment). Each section has different legal implications and reply deadlines. Knowing the section helps you understand whether the department is simply correcting a maths error or launching a deep-dive scrutiny.
Example: A taxpayer identifies that the notice is issued under Section 143(1), indicating a mismatch rather than a full scrutiny.
- Note the response deadline: Check the ‘due date’ for the response, which is usually 15-30 days from the date of receipt. The Finance Act 2025 maintains strict adherence to these timelines. Missing a deadline can lead to an ‘ex-parte’ assessment, where the officer decides your tax liability based on available data, often resulting in higher taxes and penalties without your input.
Example: A notice received on January 1 shows a response deadline of January 20, giving the taxpayer limited time to reply.
- Analyse the discrepancy (AIS/TIS comparison): Log in to the portal and compare the notice details with your annual information statement (AIS) and taxpayer information summary (TIS). Most notices in 2025–26 arise from mismatches between what you declared and what banks or employers reported. If the bonus you received wasn’t reported but shows in the AIS, the department’s automated system will flag it immediately.
Example: A bonus reflected in the AIS but missing from the filed return triggers an automated mismatch notice.
- Gather digital supporting evidence: Collect all necessary digital documents, such as salary slips, Form 16, bank statements, and investment proofs. Since the process is faceless, your evidence must be clear and self-explanatory. For bonus-related notices, keep your employer’s bonus letter and bank credit entries ready to prove the exact amount received and the TDS already deducted by the company.
Example: A taxpayer downloads Form 16 and bank credit statements to support the bonus amount declared.
- Draft a point-by-point rebuttal: Prepare a formal response that addresses every specific ‘point of dispute’ mentioned in the notice. Use a professional and factual tone. If you agree with the discrepancy, state it clearly; if you disagree, explain why, using your gathered evidence. Avoid vague language; the automated systems and ‘assessment units’ look for direct answers to the queries raised.
Example: A taxpayer prepares a structured reply explaining why the reported income differs from AIS data.
- Submit response via e-proceedings: Access the ‘Pending Actions’ tab on the e-filing portal and select ‘e-proceedings.’ Here, you can view the active notice and click ‘submit response.” You can choose agree,’ ‘disagree,’ or ‘partially agree.’ Upload your drafted response and supporting documents in PDF format. Ensure the file size remains within the portal’s limits (usually 5MB per file).
Example: A taxpayer uploads PDFs of supporting documents and selects ‘partially agree’ while responding online.
- Evaluate the ‘updated return’ option: If you realise you made a genuine mistake (like forgetting to report a bonus), the Finance Act 2025 allows you to file an updated return (U-return) under Section 139(8A). This is available for up to four years from the end of the relevant assessment year. It allows you to pay the tax and a penalty to avoid further litigation.
Example: A taxpayer realises a bonus was omitted and opts to file an updated return to correct the error.
- E- verify the submission: A response is not considered complete until it is e-verified. Use an Aadhaar OTP, digital signature (DSC), or electronic verification code (EVC) to sign your submission. Once verified, you will receive an acknowledgement number. This number is your legal proof that you have complied with the notice within the stipulated timeframe required by the tax authorities.
Example: A taxpayer completes e-verification using an Aadhaar-linked OTP after submitting the response.
- Monitor for ‘case closure’ status: After submission, regularly check the ‘Worklist’ or ‘e-proceedings’ tab for updates. The department may ask for further clarifications or issue a ‘final assessment order.’ Under the Finance Act 2025, if the department is satisfied, the status will change to ‘closed.’ Ensure you download the final order for your records to prevent any future demands.
Example: After a few weeks, the taxpayer logs in and sees the notice status updated to ‘Closed.’
