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Home > Income Tax > Help Center > Reasons to get IT NoticeLast Updated: Dec 07th 2023

Income Tax Notice – Top 7 reasons why you may get one

Notices from the Income Tax Department are very common these days due to their pepped up Tax compliance measures thru computerized / automated rules.

While Receiving IT Notice is not a fun for anyone, it may create some panic among the taxpayers. The taxpayers need to react quickly, and within the specified time limit to address the queries from IT Department to clear the notice and / or Tax dues, if any.

Income Tax Notice

This document covers

  1. Top 7 Reasons
  2. How to avoid IT Notices?
  3. What would be the next steps?

1. Top 7 Reasons

Per Team, below are Top 7 reasons why a Taxpayer may get an Income Tax Notice from the Department

1. Mismatch of Income between form 26AS and Income Tax Return

If the Income declared in IT Return does not match with Form 26AS, then the ITD may serve the notice to the taxpayer for arithmetical inaccuracies. The Taxpayer should submit either the revised return or submit the response to the query.

2. Error in TDS Amount

The TDS claimed in the Tax return should match with the Form 26AS. Otherwise, the ITD may serve the notice on the taxpayer to correct the TDS amount. Prepare a defective IT return and upload the json on the ITD Portal

3. Discrepancy in Tax Returns

If the taxpayer have forgotten to include any income like interest, commission income etc., or claimed deductions under wrong sections or the information provided by the taxpayer is incorrect, then there is a chance of notice by the ITD. The Taxpayer needs to correct it immediately. The taxpayer should submit either the revised return or submit the response to the query

4. Random Scrutiny

The Income Tax Department is randomly selecting the IT returns to be scrutinized. The taxpayers needs to prepare the covering letter in explaining the reasons in his favour covering why, what, when. Upload the required documents within the time allotted by the ITD. Get an expert advise or help in submitting your response. Get a expert tax consultation today.

5. Reporting of High Value Transactions (SFT)

If the taxpayer has deposits of more than 2 Lakhs in bank, mutual funds investments of more than 2 Lakhs, Sale or purchase of Property etc needs to be reported to Income Tax Department. If not reported, then there is a chance of notice from the Income Tax Department.

6. Self-Assessment Tax Not Paid

If the taxpayer does not pay the Self-Assessment tax at the time of filing the return, then the ITD may serve a notice to the assessee requiring him to pay the tax.

7. Dis-allowances / Defects in Income Tax Return

Filing of Returns is not enough in some cases. Income Tax returns should be accompanied by some forms. Below are some examples of defects in Income Tax Returns

  1. Foreign Income – Form 67 should be submitted along with Income Tax Return
  2. Arrears – Form 10E should be submitted along with Income Tax return
  3. If the net profit from business / profession exceeds 1.2 lakhs, then Profit & Loss and Balance sheet should be filled. Otherwise, the Income Tax return may be treated as defective. Know more on how to handle defective returns.

2. How to avoid IT Notices?

It is generally very difficult to know all the rules from a common taxpayer perspective but following basic checks may avoid most inconvenience from the Income Tax Department. Some of the basic checks would be ..

  1. Understand what is typical income you receive and see how they would be taxed. (Refer Income Tax Help Center)
  2. Understand the what are typical money transactions that you do in a month and how they are taxed ?
  3. Prepare and eFile your Tax Return without fail even if you have income lower than 2.5 Lakhs per year in the following scenarios
    • receiving Foreign Income
    • became an NRI
    • owning a Business
    • working as a Contractor
    • having Freelancing Income
    • being a Managing Partner or Director of a Company
    • trading in the Stock Markets
    • trading in the crypto currencies
    • pass through income (non-gift) from friends and families
  4. Understand when TDS to be deducted when giving money to others? and at what rate such to be deducted?
  5. Caring what deductions that you have or planning to include in the tax returns?
  6. Selling a capital asset such as a house / land / machinery even if you have a loss.
  7. eVerifying your return after it is filed by you or a tax consultant.

3. What would be the next steps?

While Income Tax department do send the notices in an email and possibly intimated thru SMSs, often times these were ignored due to the plethora of emails we get on a day-to-day basis. Hence recommends taxpayers to visit ITD portal to see the notice yourself or Speak to Team to get help.

In case you want to see your IT notices on your own, visit How to see your IT Notices ?
or Visit other articles such as How to handle your IT Notices ? and other documents @ Income Tax Help Center

Tax Expert Help

Refer Income Tax Notice Handling Service Plan & Pricing to know the Service, Process, and Pricing for an Expert to handle your Notices.

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Disclaimer: This article provides an overview and general guidance, not exhaustive for brevity. Please refer Income Tax Act, GST Act, Companies Act and other tax compliance acts, Rules, and Notifications for details.