income-tax

Preventive Measures to Avoid Income Tax Notice & Demand

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

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