Income Tax Notice Know Why You Got It and How to Respond
Filing your income tax return (ITR) doesn’t always conclude your obligations under the Income Tax Act. You could receive a notice from the Income Tax Department even after you have filed and verified your returns. This can be frightening and unpleasant. Nevertheless, most notices are actually routine and are relatively easy to handle. Understanding what the notices mean and knowing how to respond correctly can help minimise the possibility of incurring penalties and extra time, and stress. If you are ever issued a notice, following these simple tips should help you figure out how to deal with the notice calmly and more effectively and avoid much bigger problems.
- DON’T IGNORE: Every notice comes with a due date; missing it can result in fines.
- USE FORM 26AS & AIS: These documents will help you check and match your income and tax deduction records.
- BE CORRECT: Mismatches can lead to extra checking or tax demands.
- ACT QUICKLY: Even small notices can create bigger problems if you don’t address them.
- GET EXPERT HELP: For complicated notices, talk to a chartered accountant or tax expert right away.
Here is a simple guide to common income tax notices and how to handle them.
1. Section 143(1)
Notice after processing your return
This is the most common notice. It compares your filed return with the department’s records. You get this notice if there’s a mismatch in tax deductions, calculation mistakes, wrong claim amounts, or if you filed your return late.
What to do
- Log in to the income tax website and check the notice.
- If it’s correct, you don’t need to do anything.
- If you owe tax, pay it within 30 days.
- If it’s wrong, file a correction request with supporting documents.
2. Section 245
Adjusting your refund against old dues
If you’re supposed to get a refund but have unpaid taxes from previous years, the department may use your refund to pay those old dues.
What to do
- Check the notice on your portal under ‘e-Proceedings.’
- Agree or disagree with their reasons within 15 days.
- If you don’t respond, they will automatically adjust your refund.
3. Section 142(1)
Inquiry before final assessment
This is a basic inquiry when you haven’t filed your return or the department needs more information.
What to do
- File your return if you haven’t already.
- Send the requested documents by the given deadline.
- Ignoring this can lead to fines or detailed checking.
4. Section 139(9)
Return with errors
If your return has mistakes or missing information, it’s considered faulty. Common problems include missing income details and wrong deduction entries.
What to do
- You have 15 days to fix and resubmit your return.
- Log in, find the notice under ‘e-Proceedings’, and respond.
- If you don’t act, your return may become invalid.
5. Section 133(6)
Request for financial details
This notice asks for clarification on transactions like large cash deposits or property purchases.
What to do
- Share relevant documents like bank statements or purchase agreements.
- Submit everything within the deadline to avoid further investigation.
6. HRA and TDS mismatch notices
These are sent when your house rent allowance (HRA) claim or tax deduction details don’t match the department’s records.
What to do
- Make sure you follow TDS rules if your rent is more than Rs. 50,000 per month.
- Keep rent receipts and your landlord’s PAN card details.
- If the mismatch is real, file an updated return and keep documents for future use.
7. Section 143(2)
Detailed checking notice
This notice means your return has been chosen for a thorough review.
What to do
- Help by submitting all proof, including income records, deduction claims, or expense receipts.
- Attend meetings if called, or respond through the website.
- Not responding may lead to tax calculations based on estimates.
8. Section 148
Income not reported in the assessment
This is issued when the department thinks some income was not declared in previous returns.
What to do
- File a revised return or provide an explanation as mentioned in the notice.
- Explain the source of income and submit relevant proof.
- Ignoring this can lead to the reopening of past assessments and penalties.
9. Section 271AAC(1)
Penalty for unexplained income
If unexplained income, like sudden large bank deposits, is found during detailed checking, this notice may be issued.
What to do
- Provide documents explaining where the income came from.
- Penalties of up to 60% can be applied if the income cannot be explained.
