Six Income Tax Notices a Salaried Individual Can Receive
1. Section 143 (1) Notice: Intimation Notice
This notice is dispatched to individuals after the income tax department processes the Income Tax Return (ITR). It serves to inform the taxpayer whether their ITR calculations align with those of the income tax department. In cases of mismatches, the notice will indicate whether a refund is due or if additional taxes need to be paid. Taxpayers will receive this notice even if there are no discrepancies or errors in their ITR.
When is this notice issued? The intimation notice under section 143 (1) is typically sent within nine months from the end of the financial year during which the ITR is filed under Section 139 or in response to a notice under section 142 (1). For ITRs filed for FY 2022-23 (AY 2023-24), this notice should be issued no later than December 31, 2024, states Manmeet Kaur, Principal Associate at Karanjawala & Co, a law firm based in Delhi.
Response Timeframe: If the notice indicates a refund or no discrepancies exist, no response is necessary. However, if there is a tax demand, the taxpayer must respond within 30 days from the notice issuance date, either agreeing or disagreeing with the proposed adjustments.
2. Section 139(9): Defective ITR
According to Archit Gupta, founder of the tax filing platform Clear, a notice under section 139(9) of the Income Tax Act, 1961, is issued when errors are found in the submitted ITR. The tax department will ask the taxpayer to correct these errors by submitting a revised ITR.
Common reasons for receiving this notice include:
- Claiming tax exemption on house rent allowance (HRA) without showing the HRA component in the salary breakup.
- Reporting TDS on income while failing to report the same income in the ITR. For example, omitting salary from a former employer or not mentioning fixed deposit interest, despite claiming TDS.
When is this notice issued? As per Sanjoli Maheshwari, Executive Director at Nangia Andersen India, such a notice may be issued within nine months from the end of the financial year in which the return is filed. For ITRs filed for FY 2022-23 (AY 2023-24), the deadline for issuance is December 31, 2024.
Response Timeframe: The notice will specify the deadline for the taxpayer’s response, which is typically 15 days according to Gupta.
3. Section 142: Inquiry Before Scrutiny Assessment
The income tax department issues this notice when it seeks clarification as to why an ITR was not filed, especially if the individual earns income above the basic exemption limit and has various sources of income flagged in the Annual Information Statement (AIS).
Dr. Suresh Surana, founder of RSM India, explains, “Notice under section 142(1) can be issued to a taxpayer requiring them to furnish their tax return if no return has been submitted under section 139(1).”
This notice may also compel the taxpayer to produce accounts or documents to support claims made in the ITR. Taxpayers are expected to respond to all queries posed by the tax department.
When is this notice issued? There is no maximum time limit for issuing a notice under section 142(1), according to Maheshwari.
Response Timeframe: The notice will specify how long the taxpayer has to respond, usually allowing a 15-day period.
4. Section 143 (2): Scrutiny Assessment
This notice is sent to salaried individuals for a comprehensive assessment of their ITR, verifying the correctness and authenticity of incomes and deductions claimed.
“Notice under section 143(2) of the Income Tax Act, 1961, is issued for a scrutiny assessment under section 143(3),” states Surana. A questionnaire is typically included with the notice, outlining the required documents for submission. The process continues until the tax department is satisfied with the responses.
When is this notice issued? The notice can be issued if the ITR is selected for scrutiny within three months of the end of the financial year in which the return was filed. For FY 2022-23 (AY 2023-24), it can be issued no later than June 30, 2024, according to Maheshwari.
Response Timeframe: The response period will vary but is generally around 15 days to address the scrutiny notice.
5. Section 148: Income Escaping Assessment
This notice is issued when the assessing officer suspects that an individual has not reported certain income from the previous year in their ITR.
Before issuing a notice under section 148, a show cause notice under section 148A(b) will be sent to explain why a particular ITR was selected for reassessment. The officer may proceed or dismiss the reassessment based on the taxpayer’s response.
When is this notice issued? The timeline for issuing this notice depends on the amount of income escaping assessment. A notice will be sent within three years from the end of the relevant assessment year if the income is below Rs 50 lakh. For income exceeding Rs. 50 lakh, reassessment can be done up to 10 years from the relevant assessment year with the approval of a specified tax authority.
The timeline for example, if income escaping assessment occurred in FY 2016-17 (AY 2017-18), the notice can be sent till FY 2025-26 (AY 2026-27) if the income exceeds Rs. 50 lakh.
Response Timeframe: The notice will include a specified response timeframe, typically 30 days.
6. Section 245: Adjustment of Tax Payable with Refund Amount
The income tax department can offset income tax refunds due for a particular year against outstanding tax demands from previous years. This adjustment occurs only when there are existing income tax dues or a refund due in the current year.
“An intimation notice under section 245 may be issued when the income tax department intends to adjust the current year’s income tax refund against any pending tax demand from past years,” explains Surana.
Taxpayers can contest this notice by submitting a response that includes evidence of any payments already made.
When is this notice issued? There is no statutory time limit for issuing this tax notice under section 245. For instance, if a taxpayer has an outstanding demand from FY 1999-2000 (AY 2000-01) and a refund due for FY 2022-23 (AY 2023-24), the tax officer can adjust the refund against the outstanding demand.
Response Timeframe: The notice will indicate the response time, generally allowing 30 days from the date of issuance.
After responding to these notices, the income tax department will review the provided reasons or agreements with the tax demand.
While the Income Tax Act stipulates specific timelines for issuing tax notices, individuals may receive notices beyond these limits in practice. Taxpayers should verify whether the notice was issued within the permissible period, as receiving it on time is not guaranteed.