
Table of Contents
- Introduction
- Accurate and Timely Filing of Income Tax Returns (ITR)
- Maintain Accuracy in Income Reporting
- Verify Tax Credits (TDS, Advance Tax and Self-Assessment Tax)
- Avoid Claiming Incorrect Deductions and Exemptions
- Maintain Proper Documentation and Records
- Reconcile AIS/TIS Before Filing
- Avoid Cash Transactions and Large Deposits
- Respond to Notices and Communications Promptly
- File Revised Return (If Required)
- Seek Professional Assistance
Introduction
To avoid income tax notices and demand notices, taxpayers should follow preventive measures to ensure compliance and accuracy in their tax filings. Here are some key steps:
Accurate and Timely Filing of Income Tax Returns (ITR)
- File your ITR before the due date to avoid penalties and scrutiny.
- Ensure that you file the correct ITR form applicable to your income sources.
Maintain Accuracy in Income Reporting
- Report all sources of income, including salary, business income, interest, rental income, and capital gains.
- Cross-check your income details with Form 16, Form 16A, and Form 26AS to avoid mismatches.
- Disclose any foreign income or assets (if applicable) to comply with legal requirements.
Verify Tax Credits (TDS, Advance Tax and Self-Assessment Tax)
- Ensure that Tax Deducted at Source (TDS) is correctly reflected in Form 26AS and AIS/TIS.
- Pay advance tax if your total tax liability exceeds ₹10,000 in a financial year.
- If any discrepancy arises, contact the deductor to rectify the issue before filing your return.
Avoid Claiming Incorrect Deductions and Exemptions
- Claim only eligible deductions under Section 80C, 80D, 80G, etc., with valid proof.
- Ensure the House Rent Allowance (HRA), Leave Travel Allowance (LTA), and Capital Gains Exemptions are backed by proper documentation.
Maintain Proper Documentation and Records
- Keep salary slips, bank statements, property sale agreements, mutual fund statements, investment proofs, and expense receipts for at least 6 years.
- Maintain business-related invoices, balance sheets, and GST records for accurate income reporting.
Reconcile AIS/TIS Before Filing
- The Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) show all high-value transactions and financial activities.
- Any mismatch between AIS/TIS and your ITR may trigger a scrutiny notice.
Avoid Cash Transactions and Large Deposits
- Cash deposits above ₹10 lakh in savings accounts or ₹50 lakh in current accounts may attract tax scrutiny.
- Property transactions above ₹30 lakh, stock market gains, and foreign remittances above ₹7 lakh (LRS) are reported to the tax department.
Respond to Notices and Communications Promptly
- If you receive any tax notice, respond within the specified time to avoid penalties or further legal action.
- Use the Income Tax e-Filing portal to track pending notices and demands.
File Revised Return (If Required)
- If you discover an error after filing, submit a revised return under Section 139(5) before the deadline.
Seek Professional Assistance
- If your return involves complex income sources, foreign income, or high-value transactions, consult a chartered accountant or tax expert to ensure proper compliance.
If you require assistance with Income Tax Notices/Demands, Manthan Experts can be your trusted
advisor. Contact them at info@manthanexperts.com.to discuss your specific needs and explore how
their expertise can benefit your business.