Income Tax Started Sending Notices to All Income Above These Limits on 6 False Cases.

Union Finance Minister Nirmala Sitharaman recently disclosed that the central government has dispatched 100,000 notices to taxpayers for various reasons. These include non-filing of returns, under-reporting of income, and misrepresentation of income. Specifically, these notices were aimed at individuals with incomes nearing Rs 50 lakh.

Receiving an income tax notice can be a daunting experience, often leaving taxpayers perplexed about the reasons behind it. However, it’s imperative to respond to these notices promptly and accurately to avoid potential legal consequences.

Tarun Kumar, the head of Direct tax practice at Coherent Advisors, sheds light on some primary reasons that might lead to receiving such a notice:

1. Discrepancies in Reported Income: The Annual Information Statement (AIS) offers a detailed summary of a taxpayer’s financial activities. This includes interest on deposits, dividends, securities transactions, mutual fund dealings, foreign remittances, and interest on savings accounts. To ensure accuracy, it’s essential to review this data before filing your Income Tax Return (ITR). Even minor errors can lead to a notice from the tax department.
2. Non-filing of ITR: The tax department runs e-campaigns to inform taxpayers who haven’t filed their income tax returns for a particular assessment year. If you’ve missed the deadline for filing your original or belated return of income, you can still file an updated return within 24 months from the end of the relevant assessment year. However, this comes with an additional tax of either 25% or 50%, based on the extent of the delay.
3. High-Value Transactions: If your reported income doesn’t match high-value transactions, like property purchases or substantial credit card bills, the I-T department might send you a notice. They may seek an explanation regarding the source of funds used for these transactions.
4. Income Variation or Inconsistency in Advance Tax Payments: Sudden fluctuations in your income or inconsistencies in your advance tax payments can lead to a notice from the tax department. They might ask for an explanation for these variations or request you to deposit the appropriate advance tax.
5. Bogus Deductions and Claims: Claiming deductions without proper documentation, such as House Rent Allowance (HRA) or Section 80C, can attract the attention of the tax department. They might issue a notice to verify the authenticity of such claims.
6. Mismatch in TDS Credit: It’s crucial to ensure that there are no discrepancies, especially concerning the TDS credit claimed when filing your tax returns. A mismatch between the TDS credit claimed in your return and the amount reflected in your Form 26AS can result in a notice from the income tax department.

In conclusion, if you receive a notice, it’s essential to understand its reason. Review the notice thoroughly and seek expert guidance if necessary. Being proactive and meticulous with your tax filings can help in ensuring accuracy and comprehensiveness.

Always cross-check the TDS credit claimed in your return with the amount shown in Form 26AS and verify the AIS and Taxpayer Information Summary (TIS) before filing your income tax return. This can help in identifying any inconsistencies or errors. Also, ensure that any deductions claimed are genuine and backed by the necessary documentation. This proactive approach can significantly reduce the chances of receiving a notice seeking clarification.