Tax trouble? How to respond to an income tax notice

The mandate to the concerned personnel was clear: file proper and amended returns by the given deadline, or face action.

For the average taxpayer, this is a wake-up call. Discrepancies, often small errors in proof or calculation, are easy to overlook, but the penalties for ignoring a notice are severe.

1. Read the income tax notice carefully

Before you panic, understand the issue. The first step is to read the notice thoroughly to determine the exact section it was issued under and the precise reason for the discrepancy.

2. Gather all supporting documents

The responsibility to justify any tax claims always lies with the taxpayer. As soon as you receive a notice, gather all supporting documents related to the issue mentioned, such as:

• Copy of the Income Tax Return (ITR) for the relevant year

• Form 16 (for salary TDS) and Form 26AS/AIS to verify any discrepancies

• Investment and deduction proofs (like Section 80C receipts, insurance premium payments, etc.)

• Bank statements and other related financial documents

3. Respond promptly

4. File the response correctly

"Non-recognition of the notice may lead to the situation whereby the refund will be automatically adjusted without further steps being taken," warns CA Maurya.

5. Consult a professional

If the notice is for scrutiny or involves complicated issues like capital gains, foreign income, or large deductions, it’s best to consult a chartered accountant or tax expert.

After submitting your reply, check the e-filing portal for an acknowledgement and keep monitoring your account for any follow-up messages until the matter is officially resolved.