How to Respond to an Income Tax Demand Notice

After filing your Income Tax Returns (ITR) for the financial year, your submissions are verified by an officer in the income tax department. You get an income tax demand notice if the income tax calculation conducted by the income tax officer does not match with your annual tax submissions.

 

This income tax outstanding demand notice will state the discrepancy found by the IT department. Your response to outstanding demand income tax is compulsory, though you can choose to disagree with this notice if you do not agree with the tax calculations.

 

To know the steps involved in sending an income tax demand notice reply, read on.

Here are the steps for an income tax demand notice reply:

• Step 1: The initial step in responding to a tax notice is heading to the e-filing official website and then logging into your e-filing account by entering the following:

1. Your user ID, which is your PAN
2. Your e-filing password
3. The captcha code

• Step 2: Click on ‘Pending Actions’ and then click on 'Response to Outstanding Demand'

• Step 3: You will find the details of the tax demand, which includes your outstanding demand account, the interest and more; click 'Pay Now' if you wish to pay the amount

• Step 4: Now, if you wish to make the submission of a response, then click ‘Submit Response’, and the screen will show 3 options to choose from:

1. “The demand shown on the portal is correct, and payment has not been made yet”
2. “The demand shown on the portal is correct, and you have made the payment”
3. “You fully or partly disagree with the demand shown on the portal”

• Step 5: This step requires you to choose between the following options:

1. When you agree with the demand, and it has not been paid yet

If you wish to move ahead with this option, then click ‘Pay Now’, and you will reach the page where you can complete the payment

2. When you agree with the demand and the payment has been made

If you have made the tax payment, then you will be required to put in the information of your challan. This information includes the amount, serial number, etc. Then, you will be required to upload a copy of your challan before finally submitting it

3. When you fully or partly disagree with the demand shown on the portal

In this case, click 'Add Reasons' to state why you disagree, then select from the list of reasons provided on the screen. You can choose from 10 options, and each option will require additional details. If you partly agree with the notice, you are required to make the payment before the final submission

An income tax demand notice includes the following information:

• Your name and home address

• The applicable Assessment Year (AY)

• The ITR type

• The date of order

• The document identification number

• Section under which the return is filed

• The e-filing acknowledgement number

• The due date for filing the original return

• The extended due date for filing the original return

• The date of filing the return

• Your PAN number

Responding to the outstanding demand in income tax is essential. Here are the reasons for responding to this notice:

• Encourages voluntary tax compliance

• Avoids legal actions and other consequences

• Upholds your responsibility as an India citizen

• Safeguards against late tax penalties and interest

• Reduces financial stress

 

Addressing the income tax demand notice is of great importance. Not only is it required by law, but complying with it can help steer clear of any consequences of noncompliance. These include late penalties and accumulation of applicable interest, and more.

 

Now that you know how to respond to demand notices from income tax, check your outstanding notices on the income tax portal and respond to them timely. To effectively respond to the income tax demand notice, you can reach out to an authorised professional, such as a CA, or even contact the IT department helpline.