ITR: You may get income tax notice for using these tactics to save tax

The deadline to submit income tax return for the assessment year 2023-24 ended on July 31. Taxpayers still have the option to file a belated or revised return till December 31 if they want to submit their ITR for AY 23-24. In the meantime, the Income Tax Department has started issuing notices to certain taxpayers regarding discrepancies in their ITR. Often taxpayers make false or incorrect claims on their tax refunds. This can result in a notice being issued against them as the particulars in their documents do not match.

If taxpayers have used any of these tactics, they might end up receiving a notice from the Income Tax Department.

Fake Home Rent Allowance claims: If a taxpayer has made false claims about Home Rent Allowance (HRA) by giving fake rent receipts, the Income Tax Department may cross-check the claims with rental agreements and other supporting documents to figure out the truth. Overstating actual home rent expenses to claim more HRA may also result in a notice.

Not reporting high-value transactions: If someone conceals high-value transactions, the tax authorities may send them a notice. The assets under the radar of the government include credit card payments of over Rs 1 lakh, fixed deposits of more than Rs 10 lakh and deposits amounting to more than Rs 10 lakh in a savings account.

Not reporting their casual income: Not accounting for casual income like lottery money, capital gains income, prize money etc. while filing ITR will lead to issues with the tax authorities later on.

Non-eligible deductions: To claim more refund, a taxpayer may make ineligible deductions under sections like 80DD, 80U or 80G. These fake claims may lead to an income tax notice. Exaggerating claims can also lead to the same result.

Concealing income: A person may report their income to be less, or ignore taking into account income on which TDS was not deducted. This may include interest in a savings bank account or income on sale of securities.

What to do if you have received an income tax notice?

If the Income Tax Department has sent a notice to you, seek professional help to understand the nuances mentioned in the document. Ensure that you clarify what the authorities expect in your response.

You need to be prompt in your response and submit your reply before the stipulated deadline on the notice. Ensure that you attach the relevant documents in your reply to support your claims and the reported financial particulars do not have any errors. If needed, file a revised ITR with the correct information to resolve the matter