Why You Can Get An Income Tax Notice – 8 Top Reasons

A written notice from the Income Tax Department advising a taxpayer of an issue with his tax account is known as an Income Tax Notice.

The notice may be sent for a number of reasons, including the failure to file an income tax return, the imposition of a fine, or the demand for specific data.

If you get a notice from the income tax department, you could start to worry. There are several possible causes for an IT notification to appear. Making incorrect calculations, failing to appropriately record income, or even claiming extravagant losses are a few examples.

Let’s look more closely at these circumstances and brainstorm ways to avoid them. In this blog post, we’ve listed the main causes of Income Tax Department Notices and provided preventative measures.

What Causes You Might Get an Income Tax Notice?

Your complete tax bill has already been settled. Your tax returns were dutifully filed. What should you do, though, if you get an income tax notice? Do not be concerned; we will cover the same topics in this part.

Here are some reasons you might get an IT notice:

1) Incorrect Assets or Income Information on the Income Tax Return

In order to prevent as much black money as possible, the Income Tax Department has been implementing a number of initiatives. You can get a notice requesting all of your income and asset details, both inside and outside of India.

Additionally, be sure to accurately fill out your income tax return document by including details like your name, residence, and PAN. If any of these particulars are false, you will be informed.

2) Differences between Actual and Declared Income Disclosure

If the income tax authorities believe that not all of your income from various sources has been recorded, you will get a notice for non-reportage.

To avoid instances of income non-disclosure while submitting your income tax return, you should compile all of your financial records and documentation of all of your revenue sources, such as paycheck stubs, bank statements, invoices, etc.

3) Sudden Changes in Investment Amounts, Increased Transactions, or Income

In the event of a sudden, significant loss in income or a sharp increase in income levels, the tax department will be vigilant.

If you have acquired assets, real estate, or real estate of a very high value or if your bank account has a lot of high-value transactions, the income tax division may become interested in you and give you a notification. Your income will be your own if you make too many investments in your spouse’s or kids’ names. As a result, it must be taken into account when calculating your total taxable income.

If this revenue is not disclosed on your tax filings, you can get a notice.

4) Surprising TDS Inconsistencies Whenever Your TDS Claim Is Wrong

Your TDS should match the TDS indicated on Forms 26AS and 16 or 16A as of the time you submitted your ITR. A difference will result in the issuance of a notification under Section 143 (1).

TDS can be deposited by your employer, the bank that maintains your fixed deposits, or a bond issuer from whom you bought bonds. As a result, if there are any discrepancies between the TDS deducted and the income and interest you have generated, the tax department will probably send you a notification.

5) Review & Evaluation

If the tax authorities have reviewed your submitted ITR, they may provide you with a notification under Section 143(2). This review may have been prompted, among other things, by errors or inaccurate reporting.

Additionally, you should be aware that the Income Tax Department may fine you, so reply to the notice as quickly as you can.

6) Filing Income Tax Returns Latter

Each assessment year’s deadline must be met in order to file your tax return. If the ITR filing deadline is nearing and you haven’t yet, you’ll get a reminder to do so.

Notice may be given in accordance with Section 142(1)(i) of the Income Tax Act, which requires that you produce the return. Tax preparation and payment are two separate processes. Therefore, if you have merely paid the tax and not filed any returns, the tax agency may give you an ITR notification.

Even if your company had a loss for the fiscal year, you still need to file tax returns. Some people just fill out their returns online. At that point, the process is still ongoing. You have 120 days to upload the returns and file the ITR. Occasionally, tax returns are submitted after the deadline. Delays may result in penalties. In such cases, the IT division might send you a notice.

7) Payment of Refunds Against Any Unpaid Taxes and Debts Owed by You

You may have unintentionally left out some interest income, but since the interest is credited to your bank account or reinvested in your assets, the department may easily pinpoint you as the source of the overstatement. If your taxes are unpaid, you can get a notification.

If you requested an income tax refund, the assessing officer may issue you a notification telling you that the dues would be deducted from your refund.

8) For Previous Tax Evasion Years

The Internal Revenue Service has the authority to review previously filed tax returns under the Income Tax Act. In accordance with section 147 of the Income Tax Act, the department may send the taxpayer a notification. An Assessing Officer may choose some tax returns for reassessment based on predetermined criteria.

A notice of reassessment is only given when the tax officer has cause to believe that income subject to tax has evaded assessment.

After Receiving an Income Tax Notice: What to Do

If you get a notice for one of the aforementioned reasons, you should take the following actions:

• Find out why the notice was sent, then carefully read it.
• Find out if the notification was issued as a result of a material discrepancy in your income tax return.
• Make sure the notice is for you by confirming the crucial details. For instance, the notice must contain your precise name, PAN Card number, mobile number, email address, and other information to demonstrate that it was issued to you.
• You must react to the notice within the allowed time frame in order to avoid penalties and legal action.

Conclusion

If you get an ITR notification, you shouldn’t panic. Instead, you ought to identify the reason for the alert and take the appropriate steps to address it.

You have two choices: file the returns after making the required adjustments, or submit the required paperwork. When filing returns, if a tax official requests that you appear in person, you should do so or appoint a tax expert to handle the situation.

A tedious process can become even more time-consuming when receiving income tax notices. Therefore, when submitting your ITR, always make sure that all disclosures and declarations are made.