Non-Filing of ITR: When Income Tax Notice Arrives and How TaxBuddy Helps You File
- Nimisha Panda
- 1 day ago
- 9 min read
Non-filing of an income tax return often triggers automated alerts when financial activity suggests taxable income but no return is submitted by the due date. The system flags such cases under the e-Campaign for non-filers, prompting taxpayers to respond through the Compliance Portal. These notices arise from AIS and Form 26AS mismatches, high-value transactions, or bank-linked income that remains unreported. Responding quickly prevents penalties, defective return treatment, and potential scrutiny. Tax platforms like TaxBuddy streamline this process by reconciling data, validating bank details, and simplifying corrective filings.
Table of Contents
Why Income Tax Notices Are Sent for Non-Filing
Non-filing notices arise from automated matching of financial records with PAN data. Several triggers commonly activate the alert:
AIS showing income from salary, interest, dividends, or capital gains
High-value deposits or withdrawals recorded by financial institutions
TDS deductions visible in Form 26AS with no corresponding return
Foreign remittances, credit card spends, or securities trades reported under SFT
PAN-linked activities such as property purchases or mutual fund investments
Bank accounts reporting interest that exceeds the basic exemption threshold
The system presumes taxable income when these activities appear, prompting authorities to seek clarification. If a return has not been filed by the statutory deadline, the notice seeks either a response confirming non-taxability or completion of the filing process.
How to Respond to a Non-Filing Notice on the Compliance Portal
The non-filing notice must be addressed through the Compliance Portal within the Income Tax e-filing website. The response process generally involves:
Checking the notice under Pending Actions → Compliance Portal → e-Campaign
Reviewing the financial transactions flagged by AIS or Form 26AS
Selecting the appropriate response: ITR filed, return not filed due to non-taxable income, income already reported by another entity, or income not related
Filing the return first, if pending, before submitting the explanation
Submitting the acknowledgement number and filing date when marking the return as filed
Uploading supporting details through e-Proceedings if additional clarification is needed
Timely compliance prevents further escalation, including defective return notices or scrutiny under extended assessments.
Documents and Financial Data Needed Before Filing the ITR
Accurate filing requires proper consolidation of financial information. The following records ensure smooth computation:
Form 16 or salary statements
Form 26AS, AIS, and TIS summaries
Bank statements for savings, current, NRO, and joint accounts
Fixed deposit interest certificates
Investment statements for mutual funds, stocks, and bonds
Capital gains reports from brokers
Rental income documents and property details
Home loan interest certificates
Foreign income and asset details (where applicable)
Collating these documents before preparing the return helps prevent mismatches that trigger further notices.
AIS and Bank Account Issues That Lead to Non-Filing Notices
AIS often brings attention to income and transactions that go unreported in the return, especially those routed through bank accounts. Many of these issues arise from mismatches between what banks, financial institutions, and reporting entities submit to the tax department and what appears in the return. Savings account interest is one of the leading reasons for discrepancies, as it frequently accumulates across multiple accounts and slips through during filing. Fixed deposit interest is another common trigger; banks report the accrued interest annually, whereas taxpayers may include only the amount credited, causing a gap between AIS and the return.
Incorrect or outdated bank details also create complications. A PAN error at the time of account opening, a branch merger affecting IFSC codes, or changes in account numbers can lead to records that fail to match the department’s database. Refund failures are often linked to these issues, where the nominated bank account is inactive or incorrectly entered, prompting the system to highlight inconsistencies. Joint accounts add another layer of complexity because transactions may be reported under one PAN while the funds belong to multiple holders, creating confusion in AIS when income attribution is unclear.
Foreign remittances and overseas income also appear prominently in AIS, especially when banks report inward or outward transfers, foreign currency purchases, or earnings received in offshore accounts. If these entries remain unreported or incorrectly classified, the system may interpret them as taxable income requiring explanation. Since AIS consolidates data from banks, brokers, insurers, and other reporting entities, even small irregularities—such as a minor deposit, a reversed transaction, or an incorrectly mapped PAN—can trigger non-filing alerts.
TaxBuddy resolves these issues by comparing AIS entries with bank statements, interest summaries, and financial records. This approach helps identify whether an entry is accurate, duplicated, or unrelated. Any incorrect items can be marked accordingly before preparing the return, ensuring that the final computation reflects accurate income and preventing further notices related to mismatches.
Penalties and Consequences of Ignoring a Non-Filing Notice
Ignoring a non-filing notice can result in:
Late filing fees under Section 234F
Penalties up to ₹5,000 for failure to file by the end of the assessment year
Additional interest under Sections 234A, 234B, and 234C
Treatment of the return as defective under Section 139(9)
Adjustment under Section 143(1) based on AIS
Possibility of prosecution if unpaid tax exceeds specified limits
Assessment or reassessment proceedings if discrepancies escalate
Authorities may also initiate deeper verification if high-value transactions remain unexplained. Timely filing prevents most adverse outcomes.
How TaxBuddy Helps You File Accurately and Respond to Notices
TaxBuddy simplifies the entire compliance journey by:
Analysing AIS, Form 26AS, and bank data to detect mismatches
Preparing accurate ITRs with corrected income details
Ensuring all bank accounts—active or closed—are properly reported
Validating refund accounts to avoid processing delays
Guiding through Compliance Portal responses
Helping prepare explanations for notices under e-Proceedings
Offering both automated and expert-assisted solutions
This integrated support reduces the risk of errors, penalties, and repeated notices.
Preventing Future Non-Filing Notices: Best Practices for FY 2024–25
Preventing non-filing notices in future years requires a consistent approach to financial tracking and timely compliance. Monitoring AIS throughout the year helps identify entries that may not match actual income, such as duplicated interest entries or transactions wrongly attributed by reporting institutions. Keeping an eye on these updates ensures that corrections can be made early instead of discovering them just before filing.
Form 26AS serves as a central record of TDS, tax payments, and reported transactions. Verifying it regularly helps confirm that all deductions made by employers, banks, and other institutions reflect correctly. Any mismatch identified months before the filing deadline can be corrected through revised entries from the deductor.
Maintaining accurate bank account records is essential, especially with multiple savings, current, NRO, or joint accounts. Ensuring that KYC information stays updated prevents erroneous reporting by banks and avoids refund delays. Closed accounts should also be tracked because AIS continues to show transactions until the bank updates its reporting systems.
Interest income often becomes a reason for non-filing notices. Reporting all types of interest—savings, fixed deposits, recurring deposits, or corporate deposits—ensures that income disclosed in ITR matches AIS entries. Even small amounts accumulate across the year and must be considered in taxable income.
Disclosing every active and closed bank account in the ITR avoids data gaps. The tax system increasingly relies on PAN-linked reporting, and missing accounts may appear in AIS despite not being listed in the return, creating mismatches.
Reconciliation of securities transactions is crucial for individuals dealing in shares, mutual funds, ETFs, or F&O. Broker statements and consolidated reports help compute accurate capital gains, matching AIS entries while preventing over-reporting or under-reporting of gains or losses.
Filing the return before the due date remains the simplest way to avoid automatic non-filing alerts. Early filing leaves room to correct errors, update documents, and respond to potential mismatches without last-minute pressure.
Using digital tax platforms such as TaxBuddy adds an extra layer of accuracy. These systems validate pre-filled data, match AIS entries, highlight inconsistencies, and help prepare error-free returns. Automated checks combined with expert guidance prevent avoidable mistakes and reduce the likelihood of notices.
Adopting these habits ensures smooth compliance, lowers the risk of tax discrepancies, and maintains a clean and stable tax profile over time.
Conclusion
Non-filing notices arise when financial records suggest taxable income but no corresponding return exists. Addressing these alerts promptly through the Compliance Portal and filing an accurate ITR restores compliance. Platforms such as TaxBuddy simplify this process by reconciling AIS mismatches, validating bank information, and guiding users through notice responses, ensuring smooth resolution and minimal disruption. For streamlined filing and timely compliance, For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy offers a dual-approach filing system that caters to simple and complex cases alike. Individuals with straightforward incomes can choose the self-filing option, which auto-imports data from AIS and Form 26AS for quick preparation. Those with multiple income sources, capital gains, business income, property income, or mismatch issues can opt for expert-assisted filing. This plan involves direct review by tax professionals, ensuring every detail aligns with department requirements and reducing the risk of future notices.
Q. Which is the best site to file ITR? The best platform for filing an income tax return is one that simplifies data collection, eliminates errors, and ensures compliance with changing regulations. A suitable option integrates AIS and Form 26AS data, automates income categorisation, and provides expert guidance where needed. Platforms like TaxBuddy stand out for combining automation with professional support, helping users avoid mismatches and department discrepancies.
Q. Where to file an income tax return? An income tax return can be filed directly on the Income Tax Department’s e-filing portal, which supports all ITR forms and online verification methods. Many taxpayers also use authorised e-filing platforms that submit the return securely to the department’s system. These platforms help consolidate income details, reconcile TDS credits, and prepare correct tax computations, especially when AIS data contains multiple entries.
Q. What triggers a non-filing income tax notice? A non-filing notice is issued when the department identifies taxable income or noteworthy transactions without a corresponding return. Common triggers include TDS deductions shown in Form 26AS, high-value transactions reported by banks, interest income in AIS, equity or mutual fund trades, foreign remittances, or property-related entries. These signals indicate that tax computation is necessary, prompting the department to initiate a compliance reminder.
Q. Can a non-filing notice be ignored? Ignoring a non-filing notice can escalate the matter into penalties, late fees, or scrutiny. The department may treat the case as a defective return scenario if partial filings exist, or initiate further verification for undisclosed income. In severe cases, continued non-compliance may lead to prosecution if tax liability exceeds prescribed limits. Responding promptly stabilises the case and prevents unnecessary legal consequences.
Q. Is late filing allowed after receiving a non-filing notice? Yes. The Income Tax Act allows filing a belated return up to 31 December of the assessment year. However, late filing attracts a fee under Section 234F and interest under Sections 234A, 234B, and 234C depending on the unpaid tax amount. Filing after receiving the notice ensures that the response can be submitted with an acknowledgement number, closing the compliance request smoothly.
Q. What if AIS shows income not actually earned? AIS occasionally reflects entries related to mismatched PANs, reverse transactions, or reporting errors by financial institutions. If an income item does not belong to the taxpayer, AIS provides the option to mark it as “not related.” These corrections help the department understand that the entry should not be considered during tax processing. The return must be prepared using the correct figures despite the erroneous AIS entry.
Q. Does non-filing always mean tax is payable? Non-filing does not always indicate tax liability. Notices are triggered even when income falls below the basic exemption limit if the system detects high-value behaviour, such as large bank deposits, securities transactions, or credit card spends. The department seeks clarification to ensure the income is not taxable, or that reported transactions do not represent undisclosed income. Providing a valid explanation closes the notice without further action.
Q. Can bank interest alone trigger a non-filing notice? Yes. Bank interest recorded in AIS may push the total income above the taxable threshold, especially when multiple accounts accumulate interest across the year. Even small individual amounts add up when combined with other income sources. If the system detects interest that appears taxable but no return exists, an automated non-filing alert is generated.
Q. How to fix incorrect bank account details after filing? Incorrect account numbers, IFSC codes, or nominee account selections can delay refunds or create mismatches during AIS reconciliation. These details can be corrected by filing a revised return with updated bank information. Once corrected, refunds are reprocessed and credited to the nominated account. Keeping bank details updated also prevents future defective-return notices.
Q. What happens after responding to a non-filing notice? After submitting the response, the department reviews the details and verifies the ITR against AIS and Form 26AS. If the explanation aligns with available data, the compliance task is marked as closed. In some cases, additional clarifications may be requested through e-Proceedings. Once resolved, the taxpayer’s compliance history is updated, reducing the likelihood of repeated alerts.
Q. What role does TaxBuddy play in notice-related compliance? TaxBuddy assists by reviewing AIS, TIS, and 26AS entries to identify mismatches that triggered the notice. The platform prepares accurate tax computations, ensures the correct ITR form is selected, and validates every income detail before submission. It also guides the user through the Compliance Portal response, helping prepare explanations and attach supporting documents if required. This structured approach reduces the risk of penalties and ensures quick closure of non-filing notices.
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