Income Tax Notice Alert: ITR Filing for FY 2024-25

As the Income Tax Return (ITR) filing season for the financial year 2024-25 begins, taxpayers must be aware that their responsibilities extend beyond just submitting their returns. The Income Tax Department may issue notices even after returns are filed and verified. While this can be alarming, most notices are part of standard procedures that can be managed effectively. Understanding how to respond to these notices can help taxpayers avoid penalties and reduce stress.

Understanding Income Tax Notices

Taxpayers should recognize that receiving a notice from the Income Tax Department does not necessarily indicate wrongdoing. Notices can arise for various reasons, including discrepancies in reported income or documentation issues. Sudhir Kaushik, Founder and CEO of Taxspanner.com, emphasizes the importance of not ignoring these notices. Each notice comes with a deadline, and failing to respond on time can lead to penalties. Taxpayers are encouraged to familiarize themselves with their tax documents, particularly Form 26AS and the Annual Information Statement (AIS), as these documents help verify and reconcile income and Tax Deducted at Source (TDS) data.

Moreover, accuracy is crucial. Mismatches in reported figures can trigger further scrutiny or additional tax demands. Taxpayers should act promptly, as even minor notices can escalate into more significant issues if left unaddressed. For complex situations, seeking assistance from a chartered accountant or tax professional is advisable to navigate the intricacies of tax regulations.

Common Types of Notices and Required Actions

Several common types of notices may be issued by the Income Tax Department, each requiring specific actions from taxpayers. For instance, under Section 245, if a taxpayer is eligible for a refund but has outstanding dues from previous years, the tax authorities may offset the refund against these dues. Taxpayers must review the notification in their account and respond within 15 days, either accepting or contesting the grounds stated. Failure to respond will result in automatic adjustment of the refund.

Another common notice is under Section 142(1), which is issued when tax returns are unfiled or additional information is needed. Taxpayers must submit their pending returns and provide all requested documentation within the specified timeframe to avoid penalties. Similarly, Section 143(1) notices are sent post-return processing to verify submitted returns against the department’s database. Taxpayers should check their accounts for discrepancies and clear any tax dues within 30 days if applicable.

Addressing Defective Returns and Information Requests

Notices under Section 139(9) indicate that a tax return is defective due to errors or missing information. Taxpayers are given 15 days to correct and resubmit their returns. Accessing the notice in the ‘e-Proceedings’ section of their account is essential for compliance. Failure to address these defects may lead to invalidation of the return.

Additionally, Section 133(6) notices require taxpayers to provide explanations for specific financial activities, such as large cash deposits or real estate purchases. Timely submission of supporting documents, including banking records and contracts, is crucial to avoid further investigation.

Taxpayers should also be aware of discrepancies related to House Rent Allowance (HRA) and TDS. Notifications regarding these discrepancies require verification of TDS compliance for rent payments exceeding Rs. 50,000. Proper documentation, including rent receipts and landlord PAN details, should be maintained. If discrepancies are confirmed, a revised return must be submitted along with supporting documents.

Serious Notices and Their Implications

Certain notices indicate more serious issues, such as those issued under Section 148, which addresses undisclosed income. Taxpayers must submit updated returns or clarifications as requested. Non-compliance can lead to reassessment of previous years and potential penalties. Similarly, Section 271AAC(1) notices may be issued when unexplained deposits are discovered during assessments. Taxpayers must provide documentation to establish the origin of these funds, as failure to do so can result in penalties of up to 60% of the undisclosed amount.

Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.

Follow Us on Twitter, Instagram, Facebook, & LinkedIn