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.