Among all the letters which might reach your door, the most dreaded one is undoubtedly a letter from the Income Tax department. The other day, when my friend Bijoy called me with a broken voice, I answered jokingly, “That means you are earning. And in right proportions.”
But jokes apart, a notice from the Income Tax department is a matter of concern for a receiver. And there is a surge in the number of notices being served to an income tax assessee. The reasons are many. A strict adherence of KYC norms and e-filing has improved data processing and analysing. Therefore, it is easier for the IT department to find a non-disclosure of income or a high-value transaction or defective filing of the assessee. Nevertheless, a notice does not mean that you have committed an offence or crime. Even for a minor error, the IT department may send you a notice. First thing first. The moment you receive a notice from the Income Tax department, check the following:
• Tally the name in your notice.
• Tally the PAN.
• Now check the assessment year, and the issuing officer.
• Check the document identification number, if any
The IT department sends you a notice when:
• When there is a mismatch of the TDS amount filed by you and your employer, you may get a notice from Income tax department. In such cases, just ask your employer to rectify the TDS amount credited to you.
• If there is a mismatch between the amount you declared and the return you filed. These may arise when you forget to include income from the interest of FDs or declare deduction under wrong section or due to incomplete information.
Remember, such kind of minor notices are generated by the automated system from the Income Tax department randomly. Sometimes, you might file everything correctly and may still receive a notice. But when you are asked a particular specific document, you should furnish it immediately. The other serious categories are:
• If you have not filed your tax for many years, the Income Tax department will send you a notice. But if you are not required to file income tax under our laws, then you should state this fact to the department without delay.
• It is a common practice to invest in the name of your spouse or children. Let’s say, you bought a mutual fund product in your wife’s name. As per section 64 of the Income Tax Act, any income you generate out of these mutual fund is still considered your income.You need to ensure that you declare such income at the time of filing your returns.
Chances of you receiving a notice is much higher if you have done a high value transection, which includes:
• Cash deposit of more than ten lakhs/ year.
• More than two lakhs/ year, credit card purchase.
• Mutual fund investment of more than two lakhs/ year.
• Bond or debenture purchase of more than five lakhs/ year.
• Both sale or purchase of property of 30 lakhs.
• Again, any assets whose net value is above 30 lakhs attracts wealth tax. These assets include - land, a second home, gold, antiques, etc.
Lastly, for random scrutiny, the IT department sends notices in numbers. So, if you have received such a notice, don’t panic, just follow these steps:
• Check the validity as well as the duration within which you have to respond.
• Make multiple copies of the notice received.
• Submit documents requested, along with a cover letter, listing all the documents to the Assessing Officer.
• Request for an acknowledged copy of the cover letter from the Assessing Officer for your own records.
• If the notice is regarding your old dues, they can be adjusted against any pending refund claims made by you for the current year.
-the writer is the founder of www.econpenny.com
