You must file ITR if your earnings in a financial year are taxable.
Filing income tax returns (ITR) is mandatory for individuals with taxable income to avoid any penal action from the income tax department. However, despite filing the ITR within the deadline, some taxpayers may still receive an income tax notice. This does not necessarily imply any wrongdoing, but prompt and proper response to the notice is necessary. The income tax department issues notices for several reasons, including discrepancies in declared income and actual income, failure to report high-value transactions, incomplete documentation, late filing or non-filing of returns, and random scrutiny.
One of the primary reasons for receiving an income tax notice is discrepancies in declared income and actual income. The income tax department is always on the lookout for tax evaders and will serve a notice if there is any suspicion of income under-reporting. Similarly, failure to report high-value transactions, such as large cash deposits, property or luxury item purchases, attracts the scrutiny of tax officials. The income tax department requires taxpayers to report all high-value transactions to curb black money and trace under-reported income.
Incomplete documentation while filing ITR can also result in an income tax notice. Taxpayers must attach all requisite documents in support of the deductions they claim and total income in a financial year from all sources. Late filing or non-filing of ITR will also result in an income tax notice.
In some cases, the income tax department may randomly select files for scrutiny, even if the taxpayer has paid their taxes accurately and on time. Lastly, claiming excessive deductions may also attract scrutiny from tax officials, leading to a notice.
It is crucial to respond promptly and provide all necessary documents and information in response to an income tax notice. Ignoring the notice may lead to further legal actions and penalties. Taxpayers must ensure they file ITR within the due date and report all high-value transactions to avoid any discrepancies and potential legal consequences.
Read more: Income Tax on pension: Here's what you need to know before filing IT Return
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