9 reasons the Income Tax Department issues a notice
The Income Tax Department issues a notice for nine main reasons, listed below in order of how often they occur. Each reason is a discrepancy the department's systems detect automatically by comparing your ITR against the data reported to it by banks, employers, registrars, foreign tax authorities and other agencies. The reasons are: (1) income mismatch with AIS or Form 26AS; (2) TDS credit mismatch; (3) unreported high-value transactions; (4) excess or bogus deductions claimed; (5) non-filing of the ITR; (6) undisclosed interest, dividend or capital gains; (7) a defective or inconsistent return; (8) selection for random or risk-flagged scrutiny; and (9) undisclosed foreign income or foreign assets.
- Income mismatch with AIS/26AS
- TDS credit mismatch
- Unreported high-value transactions
- Excess or bogus deductions
- Non-filing of your ITR
- Undisclosed interest, dividend or gains
- Defective or inconsistent return
- Random or risk-flagged scrutiny
- Undisclosed foreign income or assets
Income mismatch with AIS/26AS: the income, TDS or transaction figures in your return differ from what your AIS and Form 26AS already show for the year.
TDS credit mismatch: the TDS you claimed does not match the credit reflected in Form 26AS, so the department queries the difference.
Unreported high-value transactions: a large deposit, card spend or investment reported under the SFT has no matching income in your return.
Excess or bogus deductions: a deduction under 80C, 80D, 80G, 80GGC or HRA that the department cannot verify against its own data.
Non-filing of your ITR: the department holds income data linked to your PAN but finds no return filed for that year.
Undisclosed interest, dividend or gains: bank interest, dividends or capital gains appear in your AIS but are missing from your return.
Defective or inconsistent return: processing at the Centralised Processing Centre finds your return incomplete or internally inconsistent.
Random or risk-flagged scrutiny: your return is picked under the Central Board of Direct Taxes (CBDT) scrutiny-selection guidelines, at random or on a risk flag.
Undisclosed foreign income or assets: the department cross-checks your Schedule FA against foreign-account data received automatically under CRS and FATCA, and flags any foreign bank account, shareholding or income you failed to report.
Which reason applies to you? Reason → data source → where to fix it
Every reason above corresponds to a specific data feed the department already receives, so you can usually identify the exact trigger before you even open the notice. Income and TDS mismatches come from your AIS, Form 26AS and Form 16; high-value transactions come from Statement of Financial Transactions (SFT) filings under Rule 114E of the Income-tax Rules, 1962; deduction and donation checks come from the AIS deduction feed and the department's NUDGE and e-verification campaigns; and foreign income or assets are matched against data India receives automatically from other countries under the CRS and FATCA agreements. The table below maps each reason to its data source and the page that explains how to respond.
| Reason | What the department sees (data source) | Read next |
|---|---|---|
| Income mismatch | AIS / Form 26AS / Form 16 (including broker-reported F&O turnover and gains) | The pillar guide, or income tax notice for salaried employees |
| TDS credit mismatch | Form 26AS versus the TDS claimed in your ITR | Salaried guide (as above) |
| High-value transactions | SFT under Rule 114E (cash, credit card, deposits) | Our guide to a notice for high-value transactions |
| Property / land purchase | SFT registrar feed for deals of ₹30 lakh or more, plus 194-IA TDS above ₹50 lakh and 50C | A notice on a property purchase |
| Excess / bogus deductions (80C, 80D, 80G, 80GGC, HRA) | AIS deduction feed plus the NUDGE campaign | The pillar guide |
| Non-filing of ITR | PAN-linked income data with no return filed | The consequences guide |
| Undisclosed interest / dividend / capital gains | Bank and AMC/registrar reporting in your AIS | The high-value-transactions guide |
| Undisclosed foreign income / assets | CRS (Common Reporting Standard) and FATCA automatic exchange versus Schedule FA | The pillar guide (foreign-asset flag; Black Money Act, 2015) |
| Defective / inconsistent return | CPC validation at processing | The pillar guide (Section 139(9)) |
| Random / risk-flagged scrutiny | CBDT scrutiny-selection guidelines | The pillar guide |
How to avoid an income tax notice: a pre-filing checklist
You avoid an income tax notice by reconciling your return to your AIS and Form 26AS before you file, not after. Because almost every notice is triggered by a data mismatch the department can see automatically, the single most effective preventive step is to download your AIS and Form 26AS from the e-filing portal, match every entry against your ITR, and report or explain any high-value transaction the department already knows about. File on time for AY 2026-27, claim only deductions you can prove with documents, disclose any foreign bank account, shareholding or income in Schedule FA, and submit feedback on any incorrect AIS entry through the Compliance portal.
- Download and reconcile your AIS and Form 26AS before filing.
- Report all high-value transactions and their source of funds.
- Claim only documented deductions, and keep your 80C, 80D, 80G and HRA proofs.
- File the ITR before the due date for AY 2026-27; filing late attracts a late-filing fee of up to ₹5,000 under Section 234F (₹1,000 where total income is ₹5 lakh or less).
- Disclose interest, dividend, capital gains and any second-employer salary.
- Disclose all foreign assets and foreign income in Schedule FA, even where no tax is payable.
- Use the correct ITR form for your income type.
- Submit AIS feedback to correct wrong third-party entries.
- Get a CA to review the return if you have business, F&O, capital-gains or foreign income.
What to do if you already received a notice
If you have already received a notice, first authenticate it on the e-filing portal and identify the section it was issued under, then respond before the deadline stated on the notice. Do not ignore it: the section (for example 143(1), 139(9), 142(1) or 148) tells you exactly what the department wants and how long you have: a Section 139(9) defective-return notice gives you 15 days, while a Section 245 refund-adjustment intimation typically allows 30 days to respond (an administrative window under the e-filing process; Section 245 itself only requires a prior written intimation before the refund is adjusted). Read the notice against your AIS and Form 26AS, gather the supporting documents, and file your response online; where the notice questions a specific claim in your return, have a chartered accountant review it before you reply.
For the full picture of what an income tax notice is and every section it can be issued under, start with our main guide.
The deadline depends on the section. A Section 143(1) intimation, the automatic summary of how your return was processed, is issued within 9 months from the end of the financial year in which you filed. A Section 142(1) inquiry you fail to answer can cost ₹10,000 per default under Section 271(1)(b) and lead to a best-judgment assessment under Section 144. A Section 156 demand must be paid within 30 days of service — the period fixed by Section 220(1). A Section 143(2) scrutiny notice must be served within 3 months of the end of the financial year in which you filed, so a return filed during FY 2026-27 can be taken up until 30 June 2027. The Assessing Officer can extend the 15-day window for a defective return on request.
Three steps follow, whatever the section. First, authenticate the notice on the e-filing portal to confirm it is genuine before you act on it. Second, respond correctly and on time through the portal, using the reply route the notice specifies. Third, know what happens if you ignore an income tax notice: the demand stands, penalties and recovery follow, and the matter does not go away on its own. Where a notice reopens an earlier year, see how far back the department can go under the reassessment time limits.
Frequently asked questions
Why did I get an income tax notice?
You most likely got a notice because the Income Tax Department found a mismatch between your ITR and the data it already holds in your AIS, Form 26AS or Form 16. The nine common reasons are income mismatch, TDS mismatch, unreported high-value transactions, excess or bogus deductions, non-filing, undisclosed interest or gains, a defective return, scrutiny selection, and undisclosed foreign income or assets. Most notices are information requests, not accusations.
What transactions attract an income tax notice?
High-value transactions reported to the department under SFT Rule 114E attract a notice when they are not matched by declared income: cash deposits of ₹10 lakh or more in a savings account, ₹50 lakh or more in a current account, credit-card spends of ₹10 lakh (or ₹1 lakh in cash), share or mutual-fund purchases of ₹10 lakh, and property deals of ₹30 lakh or more in a financial year.
Can a salaried employee with full TDS still get an income tax notice?
Yes. A salaried employee can get a notice even when the employer has deducted full TDS, because notices are triggered by mismatches the department detects from other data: interest income, capital gains, a second employer, or an HRA or 80C claim it cannot verify. If your Form 16 and AIS disagree, a notice can follow. See our dedicated guide on income tax notices for salaried employees.
Can I get an income tax notice for foreign income or foreign assets?
Yes. India receives details of residents' overseas bank accounts, shares and income automatically from other countries under the CRS and FATCA agreements, and the department matches this against Schedule FA of your ITR. If you hold a foreign bank account, foreign shares or ESOPs, or earn foreign income and do not disclose it, you can receive a notice, and non-disclosure of a foreign asset carries a ₹10 lakh penalty under the Black Money Act, 2015.
Can I get an income tax notice for claiming a high refund?
Yes. The department specifically flags returns that claim large refunds through deductions it cannot verify: common examples are inflated 80GGC political-donation claims, false 80G donations, and unsupported HRA or 80C claims. In recent years it has run targeted campaigns and issued notices to taxpayers claiming suspicious refunds. Claim only deductions you can document, and a high but genuine refund backed by proof is not itself a problem.
How can I avoid getting an income tax notice?
Reconcile your AIS and Form 26AS against your return before you file, report every high-value transaction with its source of funds, disclose any foreign asset in Schedule FA, claim only deductions you can document, and file on time for AY 2026-27. Because nearly every notice is triggered by a data mismatch the department can see automatically, matching your ITR to the AIS before filing is the single most effective preventive step.
Does an income tax notice always mean I did something wrong?
No. Most income tax notices are routine. A Section 143(1) intimation simply confirms how the department processed your return, and many notices only ask you to verify or clarify an entry. A notice becomes serious only if you ignore it or if it concerns undisclosed income. Read the section it was issued under, respond by the stated deadline, and it usually closes without penalty.
Can I get an income tax notice after my refund is issued?
Yes. A refund does not close your assessment. The department can still issue a Section 143(2) scrutiny notice within 3 months of the end of the financial year in which you filed, or a Section 148 reassessment notice within 3 years 3 months of the end of the assessment year (5 years 3 months if escaped income is ₹50 lakh or more). A notice after a refund is common where AIS data surfaces later.