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Are you likely to get an income tax notice? Find out
April, 29th 2013

Just two days before the end of the financial year, a reader called up ET Wealth with an unusual query. He had changed jobs during the year and both the employers had given him Section 80C and home loan tax benefits. "If I add both the incomes and recalculate, I will have to pay about Rs 40,000 more in tax. Should I ignore the income from the previous employer?" he asked.

When the same question was asked in an online survey conducted by economictimes.com, only 5% of the 1,217 respondents said they would not pay the due tax. Yet, thousands of taxpayers make this mistake every year when they switch jobs. "Availing of double tax benefits is very common, but it can land you in trouble with the tax authorities," warns Sudhir Kaushik, co-founder of tax filing portal, Taxspanner.com.

Let's examine the options before a taxpayer with two Forms 16. If he ignores the income from the previous employer, he may get away with paying very low tax. Or will he? It won't be long before the discrepancy is detected in his tax return by the computer aided scrutiny selection (CASS).

The red flag: the missing income for which his previous employer has deposited TDS on his behalf, along with his PAN and other details. "One could have gotten away without declaring the previous income a few years ago, when the tax records were not integrated. Now, it will certainly lead to a notice," says Delhi-based chartered accountant Surya Bhatia.

This is just one of the many reasons why an individual could be sent an income tax notice. The 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. Prakash Chandra, the tax ombudsman for Delhi, believes such innocent offenders should be treated differently from the habitual tax evaders.

"There should not be any penalty for such taxpayers. The tax authorities should take into account the intent and background of the taxpayer, as well as the magnitude of the income avoided," he says. ET Wealth reached out to tax experts to understand the factors that can lead to a tax notice and the steps small taxpayers can take to avoid getting one. They chorused the same advice: with the digitisation of tax records, one can no longer afford to be casual about tax. We also sought advice from chartered accountants on ways of dealing with a tax notice. Here's what they had to say.

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