Many taxpayers are receiving emails or SMS from the Income Tax Department regarding compliance notices. These notices usually indicate that certain financial transactions do not match the income details reported in the Income Tax Return (ITR). While this can be concerning, in most cases it is manageable if addressed correctly and on time.
Why Do You Receive a Compliance Notice?
There are mainly two common reasons behind such notices:
1. Interest on Fixed Deposits Not Reported
Many individuals do not include interest earned on Fixed Deposits (FDs) while filing their ITR. Banks generally deduct only 10% TDS, but if your total income falls under the 20% or 30% tax slab, you are required to pay the remaining tax.
If this interest income is not reported properly, the Income Tax Department may flag it and send a compliance notice asking for clarification or payment of differential tax.
2. High-Value Transactions
In some cases, notices are issued due to high-value financial transactions, such as:
- Cash deposits in bank accounts exceeding ₹10 lakhs
- Credit card spending above ₹2 lakhs
- Large investments or property-related transactions
If these transactions are not in line with the income declared in your ITR, you may be asked to explain the source of funds or pay additional tax.
How Should You Respond?
- Log in to the Income Tax portal and check the notice details
- Provide a proper explanation if the income is already disclosed
- Revise your ITR if required
- Pay the differential tax before the deadline to avoid penalties
Conclusion
Compliance notices are not always a sign of wrongdoing. They are often reminders to correct minor mismatches. Timely action and accurate reporting can help you stay stress-free and compliant.
