How to handle notices from tax department

How to handle notices from tax department

WHY YOU GET notices from tax department

A. It returns has not filed or delayed

Your employer deducted tax from your salary.
Mismatch in tax credit
TDS in your Form 16 may be different from the actual tax credit mentioned in Form 26 AS
B. What if you made

Capital gains
Selling stocks/bonds
Interest on fixed deposits
Rental income, but did not mention in your return
If are liable to pay wealth tax if the net aggregate value of these things exceeds Rs.30 lakh.

1. Unproductive assets such as urban land, vacant house, personal car, gold, expensive watches, paintings, etc.

2. Any high-value transactions with or without quoting pan

Cash deposits worth Rs 10 lakh or more in a year
Credit card purchases of Rs 2 lakh or more
Investments in Mutual fund of Rs 2 lakh or more,
Purchase of bonds and debentures in a year worth Rs 5 lakh or more.
Sale or purchase of property worth Rs 30 lakh or more also attracts the attention of the tax department.

3. Investing in the name of

Children or
Even if the investments are in someone else’s name, they have to be mentioned on your tax return because of the income clubbing provision in the income tax act.

As per section 64 of the income tax act, any income from investment made or asset purchased in the name of close relatives (spouse, minor child or daughter-in-law) is clubbed with the income of the person making the investment and taxed accordingly.

This applies to all types of investments

Fixed deposits,
Land, building,
Post office savings and
Mutual funds.
Procedure to deal with it notices

Respond to the notice, and furnish the relevant documents and information or

File a rectified return and pay the tax due, if any, within the stipulated period.

May required you to be present in person for checking returns filed. In that case either represent your case yourself or authorize a ca do so

Usually, 30 days are given for reply by post or in person.

Also, attach a copy of documents regarding income and investments claimed on the return.

Please consult a ca in case of complexities

The penalty for non-compliance: Income tax department can levy a penalty of Rs 5,000.

The penalty is not mandatory and depends upon the discretion of the assessing officer.

If any tax is due, 1% interest charged per month on the tax due from the due date.
Concealment of income or non-payment of tax, the penalty can be 100-300% of the amount due
Conclusion: Not responding to the notice could cost you a lot of time, money and peace of mind. In some cases, it could also lead to imprisonment.

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