Factors That Increase Your Chances of Receiving a Income Tax Notice TAXCONCEPT

By Neeraj Agarwala

Recent reports of the income tax department issuing notices to salaried employees have sparked concerns in all individual taxpayers’ minds. These notices issued for FY 2021-22, stem from digital parameters established by the tax department to uncover questionable claims of deductions and exemptions. So let’s see what are the factors that might increase your chances of receiving a tax notice.

Supporting documents not submitted to employer

Employers are tasked with the responsibility for examining eligible relevant documents to claim deductions like LTA, HRA as well as exemptions under Sections 80C and 80D. However, when employees fail to furnish these documents to their employer but still claim the deductions in their tax returns, the tax department is inclined to issue notices in such cases.
HRA & house loan deductions

At times, individuals make incorrect claims of both House Rent Allowance (HRA) and house loan deductions in their tax returns. While it’s permissible to claim HRA and house loan deductions concurrently under a few specific conditions, such as owning a house in a different city from your workplace; claiming both deductions can trigger a notice by the tax department. The purpose of this notice is to grant the tax department an opportunity to examine these cases.

HRA claims without landlord’s PAN

For taxpayers claiming HRA deductions, providing the PAN, name, and address of the landlord is obligatory if annual rent payment is over 1,00,000. However, there has been misuse of this provision by certain individuals who falsely claim HRA deductions under1,00,000 to evade PAN submission. To counter this, the tax department is more prone to send notices to those claiming HRA deductions without furnishing the landlord’s PAN.

Omitting additional income

Any additional income derived by a taxpayer is required to be separately reported by taxpayers. Failure to disclose such income raises the likelihood of tax scrutiny, particularly when income has been received through banking channels or TDS is deducted by the service recipient.

While salaried individuals’ tax contribution is substantial, it’s crucial to resist the temptation to claim wrong deductions in order to reduce tax liability. Attempting to deceive the tax department with fabricated documents is unwise, as the department employs automation to verify document veracity. Instead of risking penalties amounting to 200% of evaded taxes, taxpayers should be forthright about any inaccurate claims and upfront file revised return in response to tax notices.


The writer is partner, Nangia Andersen India. Inputs from Neetu Brahma

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