5 Steps to Respond to Income Tax Notice Online

Written by : Knowledge Center

2024-08-02

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Any individual or organization working or operating in India is bound by the Indian Income Tax Act and is required to file information regarding income and taxes. This information is generally filed annually and is called an Income Tax Return (ITR). As per Indian Income-tax laws, any income earned in a given financial year should be disclosed in the annual ITR.

Income Tax Notices

An Income Tax (IT) Notice is sent to inform the tax assessee that his/her ITR has been picked up for scrutiny. It is important to note the difference in terminologies used. A notice is different from an intimation. An intimation is part of the process to inform the assessee regarding the progress on his/her application/return filing. In most cases, no action is required on an intimation. However, notices mandatorily require action within a particular date.

5 Types of Income Tax Notices

1. Non-Disclosure of Income

IT departments collate income information from different sources and match that against disclosures made in the ITR. In case the disclosed income is found to be less than the actual income, a notice under section 139(9) or 143(1) is sent to the assessee.

2. Delay in Filing ITR

Automated reminders, under section 139(1), are sent to assesses to file returns before the due date. In case the ITR is not filed within the due date, the IT department may issue a notice under section 142(1)(i), demanding the assessee to file the return.

3. Tax Evasion

If you have invested in your spouse’s name but forgotten to include the income earned from such investments, your taxable income would be understated. The IT department looks at this as possible tax evasion and may issue a notice under section 143(2).

4. Notice of Demand

In case any order is passed requiring the assessee to pay tax, interest, or penalty, a notice of demand under section 156 is issued. The assessee must pay the applicable amount withinthe period specified in the notice.

5. Setting off Refunds Against Tax Payable

When there is a due payable by the assessee, the IT department has the power, under section 245, to offset any refunds against such dues. An appropriate notice will be issued intimating the assessee.

How to Respond to Each Notice Type?

Generally, IT department issues notices online now-a-days. You will find the notices online, within your income tax login - the same place where you filed your ITR. You can access the content and even file the response in the place provided. Here is a step-by-step guide to log in and respond to a notice.

Step 1: Visit the home page of Income Tax Department, Government of India.

Open https://www.incometaxindiaefiling.gov.in/home

Step 2: Login using your credentials. The user ID is your PAN number.

Step 3: Check for Any Notices. Also, check ‘Worklist’ tab for actions required to be taken

Step 4: View Detailed Notices and File Response by Clicking on Submit. In case of tax demands, the assessee has to select one of the following while submitting a response:

Disagree with demand
Demand is correct
Demand is not correct but agree for adjustment
Demand is partially correct

Step 5: Submit and keep checking back once in a while to see whether any fresh follow-up notices are seeking further clarification.

Is it Mandatory to File ITR?

Filing ITR, before the stipulated deadline, is mandatory under the following circumstances:

If your income is above the basic exemption slab or limit
If you have paid excess income tax and would like to claim a refund
You have financial assets or entities outside India
Foreign companies that are eligible for treaty benefits on financial transactions in India
You are an NRI with an accrued income of Rs.2.5 Lakh in a year in India.

Late filing of ITR can attract a financial penalty that depends on the extent of the delay. Non-filing of ITR is an offence under Section 276CC of the Indian Income Tax Act, and the defaulter can be imprisoned for a period anywhere between 3 (three) months to 7 (seven) years depending on the tax payable.

Learn which ITR should you file.

Revealing incomes is logical because the trail of transactions can anyway be easily traced. If you buy a high-value asset, the seller will have to report the sale. In this case, the IT department may ask you to provide the source of income. Disclosing this income in the ITR would make it easier to explain. If the source is not clear and not disclosed in the ITR, the IT department may charge up to 60% in taxes in addition to a hefty penalty.

Disclosing income is recommended even for incomes that are exempted from any taxes. ITR filing is easy and convenient because now online ITR filing is possible. Even the last leg of the process that involves sending Form V to the IT department can be done online by doing a simple Aadhar e-verification of the document. The complete end-to-end process of filing an online ITR is hassle-free and can be completed within a few minutes if you have all your income, investment, and taxation details, including 26AS, handy.

NIL or NA ITR filings apply to people whose taxable income is within the exemption slab. Although it is not mandatory to file returns, they can still file them because the online ITR filing process is quick and can be completed quickly.

Learn how to file income tax returns online.

The Indian IT department has undergone a massive transformation in the way it manages intimations, notices, and tax demands. You are no longer required to visit the tax officer of your jurisdiction to give or seek clarifications regarding your tax assessment. All transactions are now “faceless” and completed digitalized. However, it is important to diligently respond to any notice within the stipulated time. This helps you maintain a clear track record and also fetches you certificates of appreciation from the IT department!

206AB: Section 206AB of the Income Tax Act

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