How to Respond or Reply to Income Tax Notice

How to Respond or Reply to Income Tax Notice

The IT department sends immediate alerts when any irregularities in an individual's or an entity's INCOME TAX NOTICE are discovered and must be quickly resolved. 

Since there are many forms of income tax notifications, the response to each type should likewise change.

If any inconsistency is discovered in your income tax returns, the Income Tax Department may issue notifications under different provisions of the Income Tax Act (INCOME TAX NOTICE RESPONSE). 

Many individuals have started receiving letters due to the department's new strict regulations and rapid response times. 

You may get notifications from the I-T Department by email or postal mail. These letters may be for scrutiny, failure to file, filing late or with a faulty INCOME TAX NOTICE RESPONSE, failure to disclose income, failure to match tax credits in the INCOME TAX NOTICE RESPONSE, or failure to pay self-assessment tax. 

Let's examine each notification kind in more depth and determine how to respond to each.

Notification of Income Tax Return Not Filed

You may get a notification from the I-T Department for non-filing of income tax notice reply if you submitted an ITR for one year and did not file one for the next year or if you made high-value transactions without completing a how to reply to income tax notice

You can get a warning from the I-T Department if you are a salaried person with tax deducted by your employer and you fail to submit the INCOME TAX NOTICE RESPONSE.

If you have received a letter in the mail from the Income Tax Department, you must react to the sending party and provide specific justifications for not submitting an income tax notice reply.

Mention this in the letter if you did not submit an income tax notice response since your income was below the taxable limit. 

However, submitting an INCOME TAX NOTICE RESPONSE is preferable even if your income was below the limit as a best practice, particularly if you have filed returns in the past.

Anyone who conducts financial transactions above a specific threshold must submit an INCOME TAX NOTICE RESPONSE. 

The Annual Information Return provides details regarding such high-value transactions to the I-T Department (AIR). In a fiscal year, the following high-value transactions are pertinent:

  • A cash deposit into a savings account of at least Rs. 10 lakhs
  • Payments of at least Rs. 2 lakhs on credit cards
  • Purchase of mutual funds costing at least Rs. 2 lakhs
  • Purchasing or selling real estate valued at least Rs. 30 lakhs

An income tax notice response must be submitted even if you experienced a loss in these transactions or if any of them included gifts of any sort. 

Please list why you decided not to submit an INCOME TAX NOTICE RESPONSE in your response to the notice. 

If your initial assumption was incorrect, you might submit an income tax notice reply if the assessment year's filing date has not yet passed; you may include the INCOME TAX NOTICE RESPONSE-V/acknowledgement in your response. 

If there is no time to submit a return, you must demonstrate that no tax is owed by including a calculation of your income and assets with your reply. You could have to pay penalties if the tax is overdue.

You are not excluded from filing a return if you are a salaried employee, and your employer deducts TDS from your pay. 

When your income exceeds the income tax thresholds, tax is withheld; therefore, you are still required to submit an income tax return whether or not tax has been withheld from your pay. 

You should submit the INCOME TAX NOTICE RESPONSE and include the INCOME TAX NOTICE RESPONSE-V/acknowledgement with your response to the authority if you have enough time to file the return. 

If the income tax notice tax reply date has passed, you must include a computation of your income and assets to demonstrate that you did not escape paying taxes.

You might respond online to the I-T notification if you got it by mail. Go to the Compliance part of the Income Tax e-Filing website after logging in, where you may see the notification. 

You may reply using one of the following options:

  • Return is submitted
  • Return being prepared
  • The company is now closed.
  • Lack of taxable income
  • Others

After selecting the appropriate option, proceed to "Related Information Summary" and complete the necessary fields.

ITR Delayed Filing Notice

You will get a notification for non-filing an income tax notice reply if your income tax return is not submitted by July 31. 

You can get this notification within a year of the assessment year's end, for which a return hasn't been submitted. 

As soon as you can, submit your INCOME TAX NOTICE RESPONSE and include the ITR-V, or respond "Return under preparation."

Notice for Income Withholding

If you have not disclosed any income in your INCOME TAX NOTICE RESPONSE, the I-T Department may issue a notice for non-disclosure of income. 

The I-T Department would accuse you of concealing income sources and give you a warning if TDS has been deducted and you have no income to show for it or if they have knowledge of money like bank interest or income from shares and securities via the AIR.

Remember to check your INCOME TAX NOTICE RESPONSE against Form 26AS before submitting it.

If you unintentionally left out any income source that is listed on Form 26AS, file an amended return.

You must recalculate your income and tax obligations and transmit them to the department if the return-filing deadline has passed. 

If any taxes are owed to the government, they must be paid together with any relevant interest and penalties, and a receipt or challan for the taxes that have been paid may be included in your response.

Notice of Invalid Tax Credit

You will probably get a notification for a tax credit mismatch if the tax credit in the INCOME TAX NOTICE RESPONSE and Form 26AS do not match. 

In this instance, compare the tax credit information in Form 26AS to that in your TDS and INCOME TAX NOTICE RESPONSE. 

File a revised version or correction of your INCOME TAX NOTICE RESPONSE after making the necessary changes. You must first correct any errors in Form 26AS if there are any.

Notice of Self-Assessment Tax Nonpayment

The INCOME TAX NOTICE RESPONSE you submitted would be regarded as faulty if you filed a return, even if you owe the government tax. 

Make the necessary tax payment in this situation, then submit an amended return.

The Section 142 Notice (1)

This warning was sent before the I-T Department looked into your tax payment. 

The agency requests information from the taxpayer on their income, investments, taxes paid, assets, and liabilities as part of its first inquiry. 

You can be required to provide tax and income information for both yourself and anybody else for whom you are legally obligated to pay taxes, such as a dependent or a decedent for whom you are the legal successor. 

The Assessing Officer may opt not to review your case if he is pleased with the papers and information you have provided. 

Even if you believe the information requested has no bearing on you, Section 142(1) requires you to answer the notification; otherwise, you risk fines and maybe legal action.

Warning Regarding Section 245

If you have requested a refund of the tax you have already paid, but there are outstanding debts in your name, Section 245 serves you with a notification. 

The department informs you of your requested reimbursement and any outstanding requests from prior years via this communication. 

The dues and refunds will be offset against one another if you don't reply to this message. 

You may need to submit a rectification or revision of the return if there is any problem. 

Suppose you have any corrections to make to the prior demands. In that case, you must reply with the measures you took to fix the inaccuracies in the prior INCOME TAX NOTICE responses and the justification for the return you are requesting.

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Conclusion

Concluding, when you get a letter from the Income Tax Department, the first thing to keep in mind is not to freak out. 

Consult a tax adviser if you need help with how to reply. Be honest in your responses, and provide as many supporting documents as you can. 

Make any necessary INCOME TAX NOTICE RESPONSE modifications as soon as you can. 

Move to online INCOME TAX NOTICE RESPONSE filing as soon as you can since it will make it simpler to deal with Income Tax Notices.

FAQs

  • What exactly is meant by assessment?

Every taxpayer is required to provide the Income-tax Department with information about their income and investments. These details must be provided by filing a return. Following the filing of the return by the taxpayer, the return is processed by the Income-tax Department. The Income-tax Department examines the return. The Income-tax Department's process of examining the return is known as "Assessment." Re-assessment or best judgement assessment is also included in the assessment.

  • What is Section 131(1A), and what are the reasons for receiving a notice under Section 131(1A)?

If the Assessing Officer believes that the taxpayer is concealing or is likely to conceal income, the taxpayer will receive a notice under Section 131. (1A). This notice essentially indicates that AO is conducting an inquiry or investigation into the matter. The AO should anticipate taxpayer attendance and books of accounts, a statement of all bank accounts, and details of all properties acquired during the fiscal year. Taxpayers can seek permission to attend someone on their behalf and time extensions for valid reasons.

  • What does Preliminary Enquiry Notice u/s 142(1) mean?

If the return is not filed on time, the taxpayer will receive a notice of preliminary enquiry, and the taxpayer will be required to file a return of income that is assessable.

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