The usual reaction on receiving Income Tax Notices is of tension and stress because that is the last thing we would want to receive. As a matter of fact, we must not get panicked about the situation until and unless we have gone through the notice and understood its purpose. Always remember there are various other small reasons because of which you can receive Indian Income Tax Notices from IT Department.
In this post, we have covered all possible reasons for receiving an Income Tax Notice. But despite what the reasons are, always remember that you must never ignore income tax notices and respond to them as quickly as possible to avoid inviting any trouble or penalty.
Reasons For Receiving Income Tax Notices and How To Avoid Them
Here are some common reasons because of which you can end up receiving an income tax notice:
Error in TDS Value
Reason:
- Mismatch in TDS in IT return due to delayed return filing by your employer or filing of incorrect returns.
Solution:
- Ask your employer to review the TDS amount that has been credited to you.
- Always match the TDS amount with that of your employer before filing for your return to avoid any hassles later on.
Reminder for Filing Tax Returns
Reason:
- I-T department every year send notices to all those who have not filed the income tax returns.
- These reminders can be for up to six previous years.
- There can also be a penalty of up to Rs. 5,000.
Solution:
- Respond to the notice by filing your return immediately.
- Always make sure that you file your return on yearly basis to avoid such situations.
Reporting High Value Transactions
Reason:
- If you have failed to report any kind of high value transaction.
- This includes credit card purchase beyond Rs. 2 lakhs, cash deposit in bank beyond Rs. 10 lakh, sale or purchase of real estate beyond Rs. 30 lakhs or mutual fund investment beyond Rs. 2 lakh.
Solution:
- Always report such transactions to the I-T department to avoid getting notices.
Discrepancy in Return
Reason:
- If there is a problem in your return then you will get served with a notice.
- In case you have forgotten to declare any of your income or you have provided incomplete information then you may get a notice.
Solution:
- In such a case, submit information related with the discrepancy mentioned in the notice.
- Always ensure that you have made all the income declarations.
- Ensure that you have claimed deductions under right sections.
- Information that you are providing is complete and correct.
Non-Disclosure of Income From Interest
Reason:
- If you have failed to pay tax on income received from your saving bank accounts, fixed deposits or recurring bank accounts, you will certainly get a notice.
- Deductions of up to Rs. 10,000 on interest on saving account are allowed.
- Interest on FD and recurring accounts are completely taxable if the income from interest is beyond Rs.10,000.
Solution:
- Always remember to include income from interest from bank accounts as well.
Scrutiny at Random
Reason:
- The I-T Department randomly scrutinizes returns in order to enforce tax compliance.
Solution:
- Respond to the notice after checking its validity in the allotted time period.
Documentation Review
Reason:
- Sometimes the department may ask you to review some documents using which you have filed your I-T returns to have some clarity.
Solution:
- You must quickly submit the required documents which have been asked for.
Investments Made in Family Members’ Names
Reason:
- In case you have made any investments in the name of your family members in order to evade taxes then any income from these investments is going to be taxable.
Solution:
- On receiving a notice, you must declare that income and have the error rectified by paying the tax you are liable to pay.
- Also make sure that you declare all such kind of incomes when you are filing the return to avoid any notices in future.
These are the probable reasons which can lead be the reason for you receiving an Income Tax notice.