What to Do If You Receive an Income Tax Notice: Types, Reasons & How to Respond

Getting an income tax notice can be alarming, but it doesn’t always mean you’re in trouble. From small mistakes in your return to bigger concerns like unreported income, the reasons can vary. The key is to stay calm, understand the notice type, and respond the right way.

Why You May Get an Income Tax Notice

• Tax notices are issued for various reasons, including:
• Mismatch in tax details (TDS/TCS in Form 26AS vs. ITR)
• Large transactions (property purchases, high deposits, stock trades)
• Claiming excessive deductions or exemptions
• Failure to file returns despite having taxable income
• Random scrutiny by the tax department

Types of Income Tax Notices and How to Respond

1. Intimation Notice (Section 143(1))

What it means: A routine message after your ITR is processed, highlighting corrections or mismatches.
Why it's sent: TDS mismatch, errors in tax calculation, or payment differences.
What to do: Check for discrepancies. If accurate, no action is needed. If not, revise your return or respond online.

2. Defective Return Notice (Section 139(9))

What it means: Your return is incomplete or has mistakes.
Why it's sent: Wrong ITR form, missing income details, incorrect personal info.
What to do: Correct and refile the return within the specified deadline (usually 15 days).

3. Reassessment Notice (Section 148)

What it means: The department suspects income has escaped assessment.
Why it's sent: Unreported high-value transactions or suspected evasion.
What to do: Respond within 30 days with relevant proofs. If already reported, submit supporting documents.

4. Notice for Non-Filing (Section 142(1))

What it means: You haven’t filed your return despite having taxable income.
Why it's sent: Visible financial activity or TDS deductions, but no ITR filed.
What to do: File your ITR immediately if required. If not liable, explain your case online.

5. Late Filing Penalty (Section 234F)

What it means: A penalty for missing the ITR due date.
Why it's sent: ITR filed after the deadline.
What to do: Pay the fine (₹1,000–₹5,000) and file your return.

6. Tax Demand Notice (Section 156)

What it means: You owe additional tax.
Why it's sent: Underpaid taxes or disallowed deductions.
What to do: Pay within 30 days or appeal if you disagree.

Common Mistakes to Avoid

• Ignoring the notice or responding late
• Sending incomplete or incorrect responses
• Failing to maintain proper records to support your claims

How to Deal with a Tax Notice Smartly

• Double-check the notice: Ensure your PAN, year, and issue match your records.
• Understand the reason: Read the details carefully.
• Prepare your documents: Collect Form 16, Form 26AS, bank statements, etc.
• Respond promptly: Use the Income Tax Portal or take help from a CA if unsure.

Tips to Avoid Tax Notices

1. File your return on time and verify it.
2. Match details with Form 26AS/AIS before submission.
3. Declare all income, including freelancing or side gigs.
4. Maintain tax-related documents for at least 6 years.
5. Consult a tax professional for complex returns.

ITR Filing Update for FY 2024-25
As of July 17, over 1.36 crore ITRs have been filed for the current financial year. Out of these, more than 1.32 crore have been verified and over 1.12 crore returns processed. The tax portal now has 13.12 crore registered users, reflecting a growing compliance culture.

Receiving an income tax notice isn’t the end of the world - it's a reminder to review your return carefully and respond responsibly. With the right information and a timely reply, you can stay on the right side of the taxman and avoid unnecessary stress.