How to deal with Income Tax Notices?

Income Tax Notices

There are various times when income tax department sends notice to people regarding certain issues. Many people fail to deal with that. To deal with those notices this article will help you.

1. Handle it carefully- Whenever you receive any notice from income tax department don't ignore. Handle it carefully and try to know the details of the issue. Ignorance will lead to a penalty of Rs 10,000 or more along with the payment of tax.
2. Check details- Before doing anything first check the basic details such as address, PAN details, and the name and assessment year. Verify these details before taking any step as there are many chances of getting cheated.
3. Proof- If you are receiving the notice through the post so make sure that you preserve the envelope as that will serve as the proof for future purposes.
4. Check DIN- If you are receiving the notice through email or online then you have to make sure to check the document identification number.
5. Check the reasons- If you have received the income tax notice then you must check the reasons for the notice. By simply reading the notice one can come to know the reasons. Reasons for receiving the notice can be the improper filing of return, TDS, error in E-TDS return online or any other serious issue.
6. Validity- There are various kinds of notices which are sent by the income tax department. Different types of notices have different time period validity. For example, a notice of scrutiny assessment has to be served within a time span of 6 months. If it is served later then your application will be considered invalid.
7. Collect your documents- Start collecting those documents which the income tax department has ask you to. All the documents should be collected on time and with proper procedure.
8. Preparation of letter- With all the documents, a letter should be attached which need to be sent to income tax department.
9. Acknowledgment- Keep two copies of all the documents.
10. Give timely response- All the response should be given on time to the income tax department. Even if you are not able to give a response on time or collect necessary documents then you can even ask for a certain extension for the time limit. But make sure to reply as that will make you honest.
11. Take professional advice- In serious cases like that of scrutiny or assessment always take advice from your professionals such as chartered accountant. This will help you in filing the notice on time and more accurately.

Reasons for getting notice

1. Not filing of return- The income tax department sends notice to that person who has not filed their income tax return. Those persons who receive such notice should file individual ITR on time. If the return is not filed on time then a person need to pay penalty. In the case of delayed payment penalty of Rs 5000 per year can be imposed. On due income tax, an interest rate of 1% can be imposed per month.
2. Mismatch in tax rate- Sometimes there is a difference of tax rate in form 16 and form 26 AS. Form 26 AS is the actual document issued by income tax department which has all the detailed information regarding tax details. If there will be any differences in the form, the department will consider Form 26 AS. The reason for mismatch of the figures is due to either employer forgot to deposit the tax that he had deducted from your salary or deposited in someone else’s account. In both, the cases consult to your employer for a rectified return.
3. High-value transactions- Various high-value transactions should be updated to the income tax department. This is done to ensure that taxes are levied as per the rules and regulations.
4. Nondisclosure of assets- Persons who own assets whose value exceeds Rs 30 lakhs are required pay a wealth tax of 1% on the amount exceeding Rs 30 lakhs. Any person who is owning these assets are required to pay tax and if taxes are not payable then you might receive income tax notice.
5. Investment in the name of a spouse- There are many individuals who purchase assets on the name of their family, children or spouse to evade the taxes. Any income which the person generates from these kinds of mutual funds is required to be updated to the income tax department. If you own such kind of asset and are not informing the department then you might receive a notice.

In case of scrutiny

In case you receive any scrutiny notice from the income tax department then no need to get panic. Just follow the below-mentioned procedure in that case-

1. Keep in mind the duration and time limit of the notice that you receive from the income tax department. A scrutiny notice must comply within a time period of six months from the end of the financial year.
2. Don't just sit with having a copy of the notice. Make multiple copies of the notice which you have received.
3. Submit all the necessary documents required with the cover letter to the income tax department
4. Demand an acknowledgment slip from the assessing officer to be kept as a record.

Important points to be kept in mind

1. Keep calm and don't argue with the officer.
2. Take acknowledgment slip from the officer.
3. Write down all the relevant points in details.
4. All your bank statements should be safely kept.
5. Keep your form 16 issued by the employer.
6. Prepare your documents which are required.
7. On the hearing date, you must go to the assessing officer for filing the documents.

Act smartly and file your ITR with the help of experts at LegalRaasta.

This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for GST Software, GST Return Filing, GST Registration, Section 8 Company Registration, Nidhi Company Registration, IEC Registration, Fssai License, File ITR Online.