Did you get Income Tax demand notice of Re 1 to Rs 99? No need to panic, here is what you must know

In 2012, a case caught the eye of the Finance Ministry where Bangalore was sending demand notices for payment of taxes as less as Re 1, Rs 4 and Rs 6. This caused an unnecessary hardship to assesses. The case pointed out at an urgent need to modify the way tax collectors were issuing demand notice. It was stated that if refunds are less than Rs 100 and not issued by IT-department, then demand notice less than Rs 100 shall not be collected. However, to make it more clear and bring transparency, the ministry decided to introduce much more classified way of collection payments. 

What are demand notices?

It is the difference between the income deceleration in ITR and the actual tax paid. Demand notices arrive at the end of Income Tax Return (ITR) filing, where you have communicated your income and income from other sources to the Income Tax Department, followed by a final procedure for verification. In the process of verification, if the department find that the tax paid is lesser than what you owe, a demand notice will be issued. So, if you have received a demand notice of let’s say Rs 10 or Rs 50 or even Rs 95 from Income Tax Officer, it is necessary that you must clear your tax payments. However, under section 143(1), the ministry has defined that, demand of less than Rs 100 is not enforced but is liable for adjustment against future refunds.

There are three possibilities: Either the demand is correct or partially correct or completely incorrect. In all cases, you will have to intimate about the scenario with valid proof to the department. If you disagree with the demand, then you can always choose the option of disagreement but are liable to furnish details along with reasons. If you have fulfilled the demand, then while disagreeing you should provide challan identification number, BSR code, date of payment, the serial number of the challan along with amount. If the department has already reduced the demand, then provide date of order, demand amount, details of jurisdictional ITO who has rectified. 

There can also be a situation where your demand was already deducted by appellate order, however, appeal effect needs to be given by the department. In such case, you should give details of date of order alongside passed appellate order. In cases where revised return has been filed at CPC, you must furnish details like filing type, e-filed acknowledgment number, remarks, challan copy, TDS certificate, letter requesting rectification copy and indemnity bond. where rectification is carried out by assessing officer, then provide the date and remarks. 

Other cases can be appeal filed and stay petition filed or stay has been granted or instalment was sanctioned - then proof of such must be furnished. 

Coming to the second scenario, where you partially disagree with the demand, you can enter the amount which is correct and also the amount which is incorrect. To prove your this selection, you should furnish proof documents. Similar information in complete disagreement scenario is applicable in this case. But the section 143(1) plays well in scenario where you have find the demand correct. In most cases, you should pay your demand immediately, however, if there is any refund due then the outstanding demand amount can be adjusted. It needs to be noted that, you cannot disagree once you have accepted the demand. 

The section 143(1) is best described as a computerised mechanism which checks in your ITR filing and tax payable information and issues a notice. The section is used a tool to check arithmetical errors in return; an incorrect claim apparent from details compiled in return;  difference in TAN, income, challan no, BSE code seen in forms like 26AS, 16A or 16 of ITR; comparison of advance tax, tds, self-assessment; claims for carrying forward of losses to next year when ITR is submitted after due date; deductions under section 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IA post ITR filing due date and finally calculation of taxes and interest. 

After taking in these checks, the section 143 (1) concludes either increase or decrease in taxes and interest payable; or increase or decrease in refund and finally adjustments made for loss claimed. 

If your demand notice is in payments less than Rs 100, then you can adjust the amount in your next ITR filing. However, if it is above Rs 100, then you should not ignore the notice and make sure to fulfill your response within 30 days of the receipt of notice. 

Here’s how you can check your demand notice:

Firstly, login into your e-filing account at www.incometaxindiaefiling.gov.in. Provide in your user id and password to access the information. Once entered into your e-filing page, click on ‘E-file’ and visit the option ‘Respond to Outstanding Tax Demand’. Details like assessment year, demand notification number, date of the demand raised, outstanding amount payable or receivable, upload by, rectification rights, response. Once reviewed your information, you can submit your response. 

Hence, make sure that when you come across any demand notice below Rs 100, you are alert and prepared with your ITR and tax payment information to place your decision. If held liable to pay demand notice, then clear them as soon as possible.