- Not all notices from the tax department should be a cause of worry, some are just reminders
- It is recommended that if the notice is about any discrepancy, it must be replied to promptly to avoid penalty
Any letter, notice or these days mails from the Income Tax Department can cause panic, anxiety and worry among taxpayers and understandably so. Instead of being blinded by the notice, take some time off to understand what it is about and what is it that you need to do, now that you have received one. Do not ignore notices and delay your response, as doing so may result in the tax department imposing a fine of Rs 10,000 if a notice isn’t replied to by the assessee within the given timeframe.
Discrepancy in tax returns: This is common, especially when there is a problem with the returns that you have filed. It is possible that you may have forgotten to declare some income, you may have claimed a deduction under the wrong section or the information provided by you would be incomplete. In such situations, you should review the notice and your returns and rectify the error.
High-value transactions: There are certain high-value transactions like credit card purchases exceeding Rs 2 lakh, mutual fund investments of more than Rs 2 lakh, cash deposits in a bank of more than Rs 10 lakh, sale or purchase of property of more than Rs 30 lakh, etc that need to be reported to the Income Tax Department. Failing to do so results in a notice seeking clarifications and details.
Review documents: There are times when one may miss out on attaching supplement documents with the returns which are necessary. The principle applied by the tax department is that you as a taxpayer are furnishing the correct information. However, the department may ask to review some documents on the basis of which you have filed your returns. In such cases, you should immediately submit the documents that have been called for. Many a times, the documents sought are more for the purpose of verification and validation.
Reminder to file returns: The Income Tax Department often sends out reminders to those who haven’t filed their income tax returns. These reminders are at times even sent by mistake, just the way your telecom service provider sends you SMS alerts reminding you of dues and at the same time, adding that you can ignore the note if you have already paid the dues. In case of tax reminder, there is a penalty of up to Rs 5,000 that the department can levy in case of delay in filing returns. If you receive such a reminder, file your returns immediately. It may be possible that you may not be required to file returns by law, which you should intimate the tax department about.
TDS Error: There are times when there is a mismatch in the tax deducted at source (TDS) amounts in income tax returns. It is possible that your employer or another deductor may have delayed filing their TDS returns or filed incorrect returns. In such a case, you should ask your employer or deductor to review the TDS amount credited to you.
Asset non-disclosure: As a taxpayer, you are required to pay wealth tax on assets that you own that are worth more than Rs 30 lakh. The wealth tax is at the rate of 1% on the value that is above the Rs 30 lakh limit. These assets need to be disclosed and taxes on them need to be paid as well. Not doing so can lead to a notice from the department.
Investments in the name of family members: Inadvertently, many taxpayers often purchase assets or make investments in the name of their family members — spouse, children, siblings or parents. This is done to evade taxes, but any income from such investments attracts taxes in your name. This income should be declared at the time of filing your returns or you may end up garnering the attention of the tax department. In case of such a notice, you should declare the income and rectify the error.
Random scrutiny: The Tax department uses algorithms and programmes to generate a random list of taxpayers who are sent notices to scrutinise returns to enforce tax compliance and check if the taxpayer has indeed been honest with their filing. If you receive such a notice, check the validity and respond to it accordingly in the time allotted, to avoid any suspicion or further notice from the tax department.