You might have received an income tax notice even after you file an income tax return before the due date. There are many reasons for income tax notices, but we will discuss here only the top 10 reasons to receive an income tax notice.
Table of Contents
Reason 1: Mismatch of Income between 26AS or Annual Information Statement and Income Tax Return
If the income mentioned in the income tax return does not match with the Annual Information Statement or Form 26AS then the income tax department may issue notice for such inaccuracies. The taxpayer needs to file either a revised return or submit the responses to the query.
Reason 2: Mismatch of TDS Amount
The TDS amount claimed in the income tax return must match with the Annual Information Statement or Form 26AS. Otherwise, the Income tax department may issue notices to taxpayers for such mismatches.
Reason 3: Non-Declaring Exempted Income
There are certain types of exempted income on which you have no obligation to pay income tax, these income must be mentioned in your income tax return. If the Taxpayer has forgotten to show any exempted income, then the Income tax department may issue notices to taxpayers for such omission.
Reason 4: Claiming Higher Refund
To minimize interest payable on delayed refund the IT Department select higher refund cases first. In any case, If the taxpayer claimed a higher refund by showing a forged deduction, then IT Department may send notice to taxpayers.
Reason 5: Non-filing of Income Tax Return (ITR)
If a person’s gross income exceeds the basic exemption limit ( 250,000 in the case of an individual below the age of 60) during a fiscal year is required to file an income tax return within the due date. Ensure that details mentioned in the income tax return are correct and match the details available with the department. If the taxpayer has not filed an income tax return due to some personal reasons or filed with incorrect information, then such taxpayer may get an income tax notice from IT Department.
Reason 6: Declaring Lesser Income as Comparison to Previous Year Income
If there is a substantial & significant reduction in your income or a significant increase in losses compared to last year, then the IT Department may issue notice to the taxpayer for such a lesser declaration.
Also Read: How to Report Intraday and F&O Trading Income in ITR 3
Reason 7: High-Value Transaction
Department gets all information about your high-value transaction from the concerned institution. If you executed a high-value transaction either for investment or payments then the chances of getting an income tax notice are very high.
Example:- Deposits cash aggregating to 10 lakhs or more, credit card cash repayment aggregating to 1 lakhs or more, purchase share/mutual fund/ debenture of 10 lakhs or more, etc. during a year need to be reported to the income tax department. If not reported, then the income tax department may issue notice.
Reason 8: Interest from FD & Saving A/c (bank/post office/cooperative society)
Generally, banks deduct 10% TDS on interest on FD or Saving bank accounts by default, but you might pay any additional if applicable depending on your income tax bracket.
There is a big myth that once a bank deducted TDS then you don’t need to pay any tax.
For example, if you are in the 30% tax bracket and you have Rs 2 lacs FD in the bank and 8% is the interest rate, that means you will get a Rs 16,000 FD interest, now the bank will deduct 10% TDS (which is Rs 1600) and pay to the govt, and give Rs 14400 directly to you.
Now actually tax you had to pay was 30% to govt, which means that at the end of the year you need to pay additional Rs 3200 in tax. If you have not paid such an additional tax amount, then you may get notice of scrutiny proceedings.
Reason 9: Defect In IT Return
If the taxpayer filed an income tax return with incorrect details or skipped any mandatory information, then the income tax department may issue a notice under section 139(9) and direct to file a revised return.
Also Read: FAQs on Revised Income Tax Return
Reason 10: Random Scrutiny Selection
The income tax department selects IT returns on a random basis, if your return is selected for scrutiny then you have to submit the required documents within the time mentioned in the scrutiny notice.