Got an income tax notice? Don't panic, here's how to deal with it
In today's data-driven tax system, the chances of receiving a notice have increased, not because you're doing something wrong, but because the tax department now has greater access to your financial footprint. CA Surana explained, 'With enhanced data analytics, information integration (via AIS, TIS, 26AS), and increased reporting obligations, the issuance of notices has become both structured and data-driven.'The tax system tracks your financial transactions, like your salary, bank interest, stock trades, and mutual fund investments. If something doesn't match or seems off, a notice might be sent to you for clarification.But this isn't necessarily a sign of wrongdoing. Often, the notice is just a formal nudge asking for more information, missing documents, or explaining a mismatch.THE MOST COMMON NOTICES – AND WHAT THEY MEANadvertisementSection 143(1): Intimation After Return ProcessingThis is one of the most frequently issued notices and is sent after your return has been processed. It compares your declared income and deductions with the department's own data. If everything matches, no action is needed. But if there's a mismatch, like incorrect TDS or deductions, you may be asked to pay more tax or may receive a refund.According to CA (Dr) Suresh Surana, 'This is a preliminary assessment, not a final order. You still have time to revise your return under Section 139(5) if needed.'Section 142(1): Inquiry Before AssessmentThis is more of an information request. You may receive it if you haven't filed your return, or if the tax officer needs further documents to complete your assessment. This can include income details, bank records, or rent receipts.'Non-compliance can lead to Best Judgement Assessment under Section 144 and may attract penalties or prosecution,' Surana warned.Section 139(9): Defective ReturnThis notice appears when your return is found to have issues, like using the wrong ITR form, leaving out income details, or missing tax payment information. You're usually given 15 days to fix it.'If not corrected in time, the return is treated as invalid, with consequences as if no return was filed at all,' Surana explained. This could mean losing out on exemptions or carry-forward benefits.advertisementSection 245: Adjustment Against Tax DuesIf you're due for a refund but still owe tax from previous years, the department can adjust the two. A notice under Section 245 is issued to inform you about this, giving you a chance to accept or dispute the adjustment.'This adjustment can only be made after a written intimation, and the taxpayer usually has 21 days to respond,' Surana noted. Common reasons for defective returns include incorrect ITR form used, incomplete information, and non-disclosure of tax payment details, he stated.Section 148: Income Escaping AssessmentThis notice is more serious. It's sent when the department believes that you've failed to disclose certain income in past returns. The Assessing Officer must have credible evidence for reopening your case. You'll be asked to file a fresh return for the year in question, and possibly explain the source of the income in question.Surana noted that reassessments are governed by Sections 147 to 153 and can involve recalculations of losses or deductions.advertisementHOW SHOULD YOU RESPOND TO A TAX NOTICE?The first rule is simple: do not ignore it. Every notice carries a response deadline. Missing it can lead to penalties, disallowance of claims, or even reopening of your case.Start by logging into the income tax portal and reading the notice carefully. Check under which section it has been issued and verify its authenticity using the Document Identification Number (DIN). If it's a valid notice, gather all supporting documents, like ITR copies, Form 16, salary slips, bank statements, investment proofs, and submit a clear and complete response through the e-filing portal.Surana advised, "Taxpayers need to submit a comprehensive and fact-based response via the income tax e-filing portal in accordance with the requirements set out in the notice."Further, he added, 'Once the response is submitted, retain copies of your reply and acknowledgement receipts. Track the status on the portal and be alert to further updates from the department.'If you're not satisfied with the outcome, don't hesitate to explore remedies. These include seeking a rectification under Section 154, filing an appeal with the Commissioner (Appeals), or requesting a revision under Section 264, depending on your case.In other words, receiving a tax notice isn't the end of the world. In most cases, it's just the department doing its job, cross-checking information and ensuring everything adds up. Staying calm, reading the notice carefully, and responding with the right documents on time can help you resolve it smoothly.And if you're ever in doubt, don't try to guess your way through it. Reach out to a qualified tax professional who can guide you through the process.Must Watch
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
6 hours ago
- Time of India
ITR filing alert: Rebate on market gains allowed, but not auto-applied
Ahmedabad: Filed your ITR and surprised by a tax bill despite being under the Rs 7 lakh limit under the new tax regime? You're not alone. The income tax portal isn't auto-applying the 87A rebate on stock market gains—but the good news is, you can still claim it manually, say tax experts. To illustrate, if a resident individual has a regular income of Rs 5 lakh and short-term capital gains of Rs 75,000, the tax liability would be Rs 10,000 on the regular income and Rs 15,000 on the STCG (taxed at 20%). The utility currently applies the rebate only to the Rs 10,000 from regular income. However, if the taxpayer manually enters a rebate of Rs 25,000, the system accepts it — effectively reducing the net tax liability to zero. "It is good to note that the Income Tax Department appears to have accepted, in principle, that an eligible taxpayer should be entitled to Section 87A rebate even on capital gains," said Mukesh Patel, international tax expert. "However, this relief should have been auto applied by the ITR utility rather than requiring taxpayers to manually make the claim." You Can Also Check: Ahmedabad AQI | Weather in Ahmedabad | Bank Holidays in Ahmedabad | Public Holidays in Ahmedabad The debate over the applicability of the Section 87A rebate on capital gains first surfaced during ITR filings for AY 2024–25. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like People Born 1940-1975 With No Life Insurance Could Be Eligible For This Reassured Undo The confusion centred on whether the rebate was available on STCG from equities under Section 111A and long-term capital gains (LTCG) under Section 112. On July 5, 2024, the Central Board of Direct Taxes (CBDT) instructed the Centralised Processing Centre (CPC) to block such rebate claims in the utility. Taxpayers, however, argued that there had been no change to the language of Section 87A that could justify denial of the rebate. Their argument gained further strength when the Finance Act, 2025, formally amended Section 87A—but only with prospective effect, starting AY 2026–27. This, experts say, effectively vindicates the position that the rebate on capital gains is still valid for AY 2025–26—provided taxpayers proactively claim it while filing their returns.
India.com
13 hours ago
- India.com
ITR Filing Season 2025: Revised Your Return Once? Here's How Many Times You Can Do It
New Delhi: Made a mistake in your ITR? If yes, then you're not alone. Even careful taxpayers can miss out on reporting income, choose the wrong deductions, or enter incorrect details by accident. The good news is that the Income Tax Department gives you a second chance. You can easily correct these errors by filing a revised return. Under Section 139(5) of the Income Tax Act, you're allowed to revise your return and correct any mistakes you may have made just make sure to do it before the deadline. How Often Can You Revise Your ITR? You can revise your Income Tax Return as many times as needed—there's no limit. However, you must do it within the allowed time frame. According to the Income Tax Department, a revised return can be filed up to three months before the end of the assessment year or before the assessment is completed, whichever comes first. If you filed your original ITR on paper, you can't revise it online as revisions must be done using the same offline method. Who Is Eligible to File a Revised ITR? - Individuals – Including salaried professionals and freelancers - Companies – Private and public limited companies - Partnership Firms – Registered partnership entities - Hindu Undivided Families (HUFs) – Joint family units with shared assets and income How to File a Revised ITR – Step-by-Step - Login to the Income Tax e-filing portal - Select 'File Revised Return' under Section 139(5) - Enter the acknowledgment number & date of your original ITR - Make necessary corrections in the return (like income, deductions, or bank details) - Verify the revised return using Aadhaar OTP, net banking, or other available options
&w=3840&q=100)
Business Standard
17 hours ago
- Business Standard
ITR-3 filing starts: Who needs to file, what's changed & what to watch for
The Income Tax department has opened an online filing of Income Tax Return Form ITR-3 for Assessment Year (AY) 2025–26, according to its recent announcement on X. This is welcome news for individuals and Hindu Undivided Families (HUFs) earning income from business, profession, capital gains, or multiple sources. Who needs to file ITR-3? According to Naveen Wadhwa, vice president, Taxmann, ITR-3 is applicable to: -Individuals with income from business or profession (non-presumptive) -Freelancers or consultants providing services such as IT, legal, or marketing -Traders involved in regular buying/selling of shares, including F&O -Persons with income from multiple house properties -Taxpayers holding unlisted equity shares -Individuals with capital gains or foreign assets Importantly, salaried individuals who also earn from stock trading or freelancing must use ITR-3, not the simpler ITR-1 or ITR-2. ITR-3 is mandatory for those earning from Futures and Options (F&O) as it is treated as non-speculative business income, explains Shefali Mundra, chartered accountant and tax expert at ClearTax. Calculate Income Tax: Income Tax Calculator Tool 'F&O income falls under 'Profits and Gains of Business or Profession' and not capital gains, making ITR-3 the correct form,' she says. It also allows for accurate loss reporting and carry-forward provisions, she adds. Additional disclosures for ITR-3 -Capital gains split based on whether the asset was sold before or after 23 July 2024, as this impacts tax rate -Detailed TDS section codes must be reported to match AIS/Form 26AS -Loan details for claiming Section 24(b) housing interest deduction -Expanded crypto/VDA reporting, including acquisition and sale dates -Foreign income/assets and opt-out details for new tax regime (Section 115BAC) Simplifying a complex form ITR-3 is among the most complex forms due to its exhaustive disclosures, said Akhil Chandna, partner, Grant Thornton Bharat. However, he noted that the Income Tax portal has improved the filing experience this year with: -Pre-filled data for TDS, interest, salary, etc. -Real-time error checks to prevent mismatches -Simplified UI with tooltips and help prompts These enhancements aim to reduce filing errors and ease the burden, especially for first-time users. Common mistakes to avoid -Incorrectly classifying F&O income as capital gains -Choosing presumptive schemes (Sections 44AD/44ADA) without eligibility -Filing ITR-1 or ITR-2 despite business income -Assuming pre-filled data is accurate without cross-verification Capital gains: Watch out for misreporting and form mismatch Mundra also flags common errors in reporting capital gains. 'Misclassifying LTCG as STCG or vice versa, especially under the revised rules from July 23, 2024, can result in wrong tax computation,' she notes. Errors such as ISIN mismatches and incorrect grandfathering (for assets bought before Feb 1, 2018) are frequent and can lead to tax notices. She advises cross-checking returns with AIS and TIS to ensure accuracy. Word of caution While the system is smoother, over-reliance on pre-filled info or filing at the last minute during peak load could lead to issues. Users should manually verify all figures and file early to avoid portal lags. With online filing now active, those eligible for ITR-3 should gear up to file their returns accurately and in time for AY 2025–26.
