Very occasionally, one may face a situation wherein there would be a demand notice issued to an income taxpayer by the Income Tax Department. Although this is not something that needs to be acted upon immediately, people take such actions personally. Feelings of anger towards the Government are common because people religiously pay their taxes and think that notices of such nature should not have been sent to them in the first place. Basically, they consider actions like these to be an attack on their own image. Now a days department of income tax is collecting data from all your PAN based investments and transaction.
The truth is people who face this should not react emotionally but reflect logically. Invest a tiny amount of time to actually to go through the notice. The notice will clearly state why the Government thinks that there is an outstanding tax. It could be one of the following three reasons:
- It’s a genuine error from by the taxpayer were one missed adding any set of income while calculating the income tax due for the year eg like assessee miss adding interest income from fixed deposit.
- Where there is incorrect data input while filing income tax return.
- It’s a calculation error from the Income-tax department
Demand can be auto generated by CPC or it can be uploaded by assessing officer. If the demand is generated by CPC then online correction is possible and if the demand is uploaded by assessing officer then rectification right for such notices have been given to concern assessing officer only.
This article aims to educate its readers about what needs to be done in situations when an individual receives a demand notice for outstanding tax.
What is ‘outstanding income tax notice?’
An outstanding Income Tax is a tax which is pending to be paid by an individual to the income tax (I.T) department. The unpaid tax is usually from one of the assessment years in the past or a combination of the amount over a duration of time. Hence, the IT department issues a notice asking an individual to pay the pending tax. The concept is really as simple as that. A person can always reject this notice but this needs supported by proof that the tax paid by an individual was correct and the Income Tax department has miscalculated the income tax and issued an Income Tax notice.
What are a few ways to gather more information on this issue?
The World Wide Web is full of information about this problem and one can easily refer to reliable information by simply typing the problem in the search box of a search engine. Although, the IT department’s website provides good information on the subject as well. You can click on this link, to login to the website with your own ID and password to find more on the problem.
What are the ways to respond to tax demand?
Thanks to technology, it is very easy to respond to such notice. This is so much better than just a few years back wherein a person had to physically go to the Income Tax office to discuss the issue. One needs to visit this office possibly multiple times before they can actually get the right answer and get this problem fixed. Hence, It is recommended to respond to such notices online because it is easier and saves a lot of time and frustration. These are the steps to respond online to an outstanding income tax notice.
- Login to the Income Tax website
- There is an option to ‘respond to outstanding tax demand’ in the e-file section
- Various details will be displayed out of which you will need to choose to click on ‘submit’ depending on the assessment year where the outstanding tax is displayed. Each demand has its own identification number.
- After clicking on submit, three options are visible:
- Demand is correct
- Demand is partially correct
- Disagree with demand
- Demand is not correct but agree for adjustment
Select one of these depending on what your calculation and judgment are about the Income Tax Department’s decision to send you a notice. Your next steps will depend on the option you select.
If you select demand is correct
If you confirm that the demand is correct and you agree it and same will be adjusted against the refund due amount.
If you select demand is partially correct
You will need to select the correct and incorrect amount and in the incorrect amount field, enter the details of why the amount is incorrect. There are several options for a field to be populated and you can fill any one of them.
The steps mentioned atop are strictly in brief. The website is fairly easy to navigate and automatically helps an individual to populate the right fields.
If you select demand is not correct but agree for adjustment
In this case you are agreeing by the demand for adjustment to future/past refund amount pending for disbursement. Following massage will appear for your action.
Checking the response status
The most important step after you submit your response is to check if the IT department has accepted your response. In most cases, they will accept the ‘response’ if the submitted documents are correct. But if they don’t they will mention the reason of why they have rejected the response and depending on the reason further steps should be taken. You can download your response by clicking download button.
There is always a time limit that follows the notice, wherein you would need to respond to a notice in a given time frame. Check what section has the notice been sent under. The following briefly state response times related to notice types.
- Section 139 (9) – 15 days from the day of the notice
- Section 143 (1) – one year from the end of the financial year
- Section 143 (1A) – 30 days from the notice
Maintaining a clean tax record is very important nowadays because there is strict watch on tax defaulters in India currently. It is also important to get loans, for traveling abroad and for personal credibility. Hence, don’t panic if you get such a notice and resolve it cautiously. If you still think that the issue at hand is more complex than what it appears, the best advice would be to contact a good chartered accountant.