Understand What You Should Do If You Receive a Tax Notice

income tax 4097292 1280
income tax 4097292 1280

The Income Tax Department of India, along with corresponding state governments, oversee the taxation system governing Indian residents and organizations. Every earning body is liable to pay taxes according to the slab applicable for themselves, and any delay or violation in the process will initiate an intimation or notice from the IT department. 

What is an income tax notice?

A notice is issued by the IT department whenever they want to highlight a concern regarding a taxpayer’s IT return or tax assessment. It requires immediate action, unlike intimations, which may or may not require any input from the taxpayer’s end (depending on the applicable clause). 

A taxpayer might receive intimation under several different sections of the Income Tax Act 1961. 

Take a look at various notices and intimations issued by the IT department –

  • Under Section 143(1)

Intimation under Section 143(1) is issued by the Central Processing Centre for any of the following 3 cases – 

  1. An individual has due taxes under his or her profile.
  2. The final calculated reduction for the amount of loss is higher than the total presented in the filed return.
  3. A refund has been determined by the IT department.

This intimation can be issued within one year from the end of the financial year when return is filed. Taxpayers are liable to process any intimation issued under this section within the mentioned date; they can visit the web portal of the IT department to learn about the processing, or visit their nearest branch to do the same. This particular clause also applies to individuals who avail of tax savings on home loans. 

  • Under Section 143(2)

Notice under Section 143(2) of the Income Tax Act is issued when a taxpayer’s return file is sent for scrutiny. This can occur during the financial year when the e-filing of income tax is completed by an individual, or within the succeeding financial year. 

An individual will be further informed regarding the clause, which sent his or her tax return for inquiry. They will have to respond to questionnaires issued by the IT department as well as provide documents to back their claim, and submit it to the IT department for revision.

This notice can be issued against 3 instances. These being – 

  1. Understated income mentioned in the return file.
  2. Undue loss claimed in the IT return.
  3. Paid less than the total due tax liability.

Any notice under Section 143(2) should be serviced within 6 months after the completion of the assessment year when it is issued.

  • Under Section 142(1)

Notice under Section 142(1) can be issued if the IT department finds any of the two discrepancies – 

  1. If the assessing officer requires additional documents or details regarding a particular taxpayer.
  2. If a taxpayer is liable to file his or her returns but fails to do so.

Individuals receiving such notice can submit the documents and information in the official web portal, or file the tax return if absent. Failing to respond to this notice can levy a fine of Rs.10,000 (for every instance), prosecution, or both of the above. 

  • Under Section 245

Notice under Section 245 will be issued if the assessing office concludes that an individual has a pending tax for the previous years and yet claims a refund against the latest income tax payment.

Taxpayers are required to respond to the notice within 30 days of issue. They can clear their outstanding tax liability, or issue another claim for refund if they provide proof of their terms.

The Income Tax Act allows several benefits, including exemptions applicable to secured credits like a home loan. 

Taxpayers can enjoy substantial benefits, even more so if they avail such credits with a co-signer. Both applicants of a joint home loan can claim the maximum amount individually, which is why every taxpayer should know the benefits of a joint home loan before they apply for such a credit.

There are several housing finance companies that offer these types of credits. Private lenders like Bajaj Housing Finance Limited even provide pre-approved offers on loans to customers, simplifying the application process. One can check his/her pre-approved offer online by sharing only some essential details.

Understanding the different clauses and necessary actions required to process tax notice is essential for every taxpayer. Following the guidelines mentioned above will help navigate these details with ease.


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