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Five reasons you may get an income tax notice
December, 21st 2015

The tax department has identified roughly 12 lakh people who have not filed their tax returns. Many of them are innocent offenders, who may not even know they are supposed to do so. ET Wealth reached out to tax experts to understand the factors that can lead to a tax notice. Here are the main reasons:

MISMATCH IN INCOME AND INVESTMENTS, EXPENSES

If there is a mismatch between the in- come you have declared in your tax re- turn, and your investments and expenditure, you are likely to get a scrutiny notice. Banks, mutual funds, credit card companies and other establishments are supposed to report certain high-value transactions to the tax department. They have your PAN and other details, so there is no way one can sneak past them.

TDS NOT CREDITED TO TAXPAYER

You could get a notice if there is a mismatch in your TDS and income details. Check your Form 26AS online to verify if all the tax deducted on your behalf has been credited to you. "You should check it at least once a quarter and reconcile the entries with your own records," advises chartered accountant Surya Bhatia.

SHARP DROP IN INCOME

One obvious red flag is a sharp drop in the income of the taxpayer. This can be for a variety of reasons, but it immediately alerts the tax department. However, this is more common in case of businessmen and traders. For salaried people, it could be because the taxpayer lost his job, took leave without pay or went on a sabbatical during the year. More often, it is because he changed jobs mid-year and declared income from only one employer. This is a sure reason for getting a tax notice.

EXEMPTIONS SOUGHT ARE VERY HIGH

Refunds are almost considered an anathema by the tax department. Suspicions are aroused when you claim too big a refund in your return. While this is usually in case of businessmen and traders, a salaried taxpayer may find himself in this sit- uation if he has not furnished the proof of his tax-saving investments and other deductions to his employer on time. If tax has already been deducted and deposited with the government, the only way is to file a return and claim a refund. If the re- fund is too big, expect a scrutiny notice.

NOT FILED THE TAX RETURN

Thousands of individuals don't know if they have to file their return. Some believe they can skip filing if TDS has been paid. Others believe that if their income falls below the basic exemption limit after availing of various deductions, they don't need to file returns. "Even if the TDS has been deducted, , you are not absolved from filing your tax returns," says chartered accountant M.K. Agarwal. Some taxpayers who file their return online without digital signature think their work is done once the tax return is uploaded. They don't realise that if the ITR V is not submitted within 120 days of uploading, the return will be deemed invalid.

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