Income Tax Notices to Salaried Employees: Types, Reasons & How to Respond

For many salaried employees, tax season feels like a “file it and forget it” task. But sometimes, weeks or even months after submitting your return, a notice from the Income Tax Department might land in your inbox and make you feel a little anxious. 

The department sends these notices for various reasons, such as mismatches, missing information, or the need for more clarification. 

Income tax notices are more common than you might think, and they don’t always mean you're in trouble. Often, they’re just the tax department’s way of seeking clarification, correcting inconsistencies, or following up on your return. But knowing what kind of notice you’ve received and how to respond to it can make all the difference between a minor fix and a major hassle. 

In this article, we’ll break down the most common types of income tax notices salaried employees receive, why they’re issued, what you should do if you get one, and, most importantly, how to avoid them in the first place. 

What Is an Income Tax Notice and Why Does It Matter?

Every year, salaried employees file their Income Tax Return (ITR), in which they report their income and the tax paid thereon to the Income Tax Department. Sometimes, the department identifies discrepancies, instances of non-compliance, or requires additional information from taxpayers. In such cases, it issues an income tax notice. 

An income tax notice is an official communication from the Income Tax Department and is issued under various sections of the Income Tax Act. Taxpayers are required to take timely action in response to the notice to avoid penalties or legal consequences.  

The department could issue the notice for different reasons. Let's understand each type of ITR notice. 

Types of Income Tax Notices Sent to Salaried Employees 

Here are the common types of notices that employees could receive from the Income Tax department: 

1. Notice u/s 139(9):  Defective Income Tax Return  

The tax department issues a notice u/s 139(9) when the assessing officer finds any defect in the ITR filed. The defect could be due to the wrong or non-declaration of the income as per Form 26AS, missing details, incomplete return, etc.  

To ease the assessee, the assessing officer will provide complete information of the error with a possible solution to rectify the same, and the assessee will have 15 days from the date of intimation to respond. If he fails to respond, the AO will mark the return invalid and proceed with assessment. 

2. Notice u/s 142(1): Inquiry before Assessment 

This notice requests additional information and documentation from the taxpayer to complete the ITR filed. The assessee will also receive the notice under section 142(1) if they did not file their return on time. The taxpayer can serve the notice before the end of the relevant assessment year. 

3. Notice u/s 143(1): Intimation 

This notice is very common, as the tax department frequently issues it to taxpayers to rectify errors, incorrect claims, or inconsistencies in filing income tax return. If an individual receives this notice and wants to return their return, they have a 15-day window to make changes. If the assessee does not make any changes, then the tax return will be processed after incorporating the necessary adjustments specified in the notice. 

4. Notice u/s 143(2): Scrutiny 

If the assessee's response in the Income Tax Act, u/s 143 (1), is not satisfactory or fails to provide the required documents, then the tax department will send another notice u/s 143(2). There are three types of notices under Section 143(2): 

• Limited Scrutiny: It is a focused examination using Computer-Assisted Scrutiny Selection (CASS), targeting specific issues in the return, like mismatched tax credits, inaccurate information, etc. 
• Complete Scrutiny: This scrutiny is a full review of the return and documents selected by CASS. The verification of the return by the assessing officer is limited to the concerned assessment year. 
• Manual Scrutiny: It involves manual case selection by authorities based on Central Board of Direct Taxes (CBDT) criteria that vary annually. 

5. Notice u/s 148 - Income Escaped Assessment 

Let's say you are trying to save income tax by showing less income or you are not filing ITR despite being legally bound to do so. In that case notice u/s 148 will be issued and the assessing officer has the authority to assess and reassess your income. So, before proceeding with your assessment, the officer must serve a notice to the assessee and request them to provide their income return. 

6. Notice u/s 156: Demand Notice 

An income tax notice under section 156 is served if there is any penalty, tax, or amount due from the taxpayer to the tax department. Generally, this notice is served after the ITR assessment, and the taxpayer can submit the amount within 30 days from the Income tax notice. 

7. Notice u/s 245: Refund Adjusted against the Tax Demand 

This notice basically works as an intimation, which is issued when the tax refund (full/partial) for the assessment year is adjusted with the tax due from the payer. However, this is possible only when the taxpayer has received a prior notice and a chance to be heard. The assessee has 30 days to respond to the notice, and failing to do so will be an implied consent to the assessing officer, who will initiate the process accordingly. 

Common Reasons Salaried Employees Receive Income Tax Notices

Here are some common reasons for receiving tax notices: 

• Claiming Excess Deductions: Apart from standard deductions, if a salaried employee overclaims deductions, such as House Rent Allowance, beyond permissible limits. 
• Mismatch with Form 26AS: A tax notice will be issued if the Income declared in the ITR doesn’t match the details in Form 26AS, AIS, or TIS. 
• Non-disclosure of Foreign Income/Assets: In case the taxpayer fails to declare foreign income or assets on the tax return, then the notice will be issued. 
• Discrepancy in Income Reporting: The notice will also be issued if the Income reported doesn’t match the income reported by the employer, bank, or other sources’ records. 
• Undisclosed Other Income: Not declaring income from rent, interest, gifts, etc. 
• Ignoring Previous Notices: The tax department could issue a notice if the employee fails to respond to or address earlier tax department notices. 
• Non-Filing of ITR: Not filing the Income Tax Return as required can also attract income tax notices.  

Steps Monthly Earners Should Take After Receiving an Income Tax Notice

Here are the simple steps to check and download the Income Tax Notice: 

• Understand the Notice: The first thing to do is to carefully read the notice to understand the nature and reason of the notice. It could be sent for reasons like discrepancies in your tax return, non-filing, or pending dues. 
• Verify Details: Verify all the details like whether the notice is genuinely addressed to you, confirming all the details like your name, PAN, and assessment year. 
• Gather Documents: Once you understand the reason, then start collecting all relevant documents such as bank statements, Form 16, TDS certificates, ITR copies, and investment proofs based on the notice's requirements. 
• Respond Promptly: Notices have a deadline for response. Submit your reply within the stipulated time through the income tax e-filing portal or in person as instructed. If more time is needed, request an extension. 
• Provide a Clear Response: It is vital to submit a factual, comprehensive reply addressing the queries or discrepancies indicated in the notice, supported by required documentation. 
• Seek Professional Help if Needed: If unsure or if the notice involves complex issues, consult a qualified tax professional or chartered accountant for guidance. 
• Keep Records: After responding, retain copies of all communications, documents, and acknowledgment receipts for future reference. 
• Follow Up: Once you have completed all the process then monitor the status of your response via the e-filing portal and stay alert to any further notices or updates. 

The Income Tax (IT) Department sends notices for several reasons, such as asking for more information, pointing out errors, or indicating that taxpayers owe more tax. If you ignore these notices or respond late, you may face penalties, interest, or other consequences under different sections of the Income Tax Act. 

Key Sections and Consequences: 

Here are the key sections and the consequences of ignoring income tax notices: 

How to Avoid Getting Notices from the Income Tax Department?

There are multiple actionable strategies to deal with income tax notices and to maintain peace of mind: 

1. File ITR on Time 

The most common reason for an income tax notice is late or missed filing. Even if your income is below the taxable limit, make sure you file by the due date. Try to file your return in June/July and don’t wait till the last day in September/October. 

2. Report All Income Sources 

Many people only disclose their salary and attempt to conceal other income sources, such as freelance/side business income, rental income, interest earned from savings accounts/FD/ bonds, and capital gains from shares and mutual funds. 

3. Match Income with Form 26AS, AIS, and TIS 

While filing your Income tax return, collect details from your banks, employers, and other institutions and cross-verify that information with Form 26AS (tax deducted at source), AIS (Annual Information Statement), and TIS (Taxpayer Information Summary). 

4. Avoid Wrong Deductions 

One of the biggest mistakes that taxpayers commit is in claiming deductions under Sections 80C, 80D, 24(b), etc. When filing your ITR, always claim deductions for which you have proper proof (e.g., insurance premiums, tuition fees, ELSS investments), and avoid over-reporting HRA or home loan interest deductions. 

5. Check High-Value Transactions 

The income tax department closely monitors cash deposits above ₹10 lakh in savings accounts, property purchases above ₹30 lakh, spending over ₹10 lakh annually, and large investments in mutual funds, shares, or bonds. In case such transactions are not aligned with your declared income, you may receive a notice. 

6. Verify TDS and Advance Payments 

If TDS or advance tax is deducted, ensure it is reflected in your Form 26AS. Claiming a refund without matching TDS details is a red flag. 

7. Maintain Proper Documentation 

When filing your income tax, ensure you have all the necessary documents, including salary slips, rent receipts, investment proofs, and bank statements. These documents will work as your best defence during scrutiny. 

Conclusion

Receiving an income tax notice can feel overwhelming, but in most cases, it's simply the tax department’s way of seeking clarification or correction. As a salaried employee, staying informed about the types of notices, their reasons, and how to respond is the best way to avoid unnecessary stress, penalties, or legal complications. 

The key takeaway? File your ITR accurately, report all sources of income, match your data with Form 26AS and AIS, and always respond to notices on time. 

If you're unsure how to interpret a notice or respond correctly, especially if it involves scrutiny, reassessment, or demand, don’t leave it to chance.

Frequently Asked Questions (FAQs)