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AI-based risk profiling has changed how income tax notices are generated and issued in India. The Income Tax Department now relies on advanced algorithms to analyse data from AIS, TIS, Form 26AS, bank records, PAN databases, and GST portals to identify mismatches and unusual patterns. Even minor inconsistencies can trigger automated alerts and verification notices. This shift has reduced manual discretion while increasing detection speed. Understanding how this system works h

Section 80C deduction mismatches are one of the most common reasons taxpayers receive income tax notices after filing their return. These notices usually arise when investment claims shown in the ITR do not match data available with the Income Tax Department through Form 26AS or the Annual Information Statement. Even small documentation gaps can lead to disallowance of deductions, higher tax demand, interest, and penalties. Timely and accurate responses supported by valid inv

Foreign stocks and ETF investments held by Indian residents are fully taxable in India and closely monitored by the Income Tax Department. Capital gains, foreign dividends, and overseas assets must be disclosed accurately in the income tax return, especially under Schedule FA. Even small reporting gaps can trigger income tax notices linked to foreign income mismatches, unreported assets, or foreign tax credit errors. With increasing data sharing under global tax agreements, s

NRE and NRO bank accounts sit at the centre of most income tax notices issued to NRIs in India. Interest credits, large inward remittances, repatriation transactions, and TDS deductions are routinely reported by banks to the Income Tax Department. When these figures do not match what appears on the income tax return, automated notices are triggered. Most cases do not involve tax evasion but gaps in reporting, incorrect account classification, or missed disclosures. Understand

Capital gains exemptions under Section 54, Section 54F, and Section 54EC often trigger income tax notices when reinvestment details, timelines, or amounts do not align with the law. These provisions allow tax relief on long-term capital gains only when specific conditions are met, such as reinvesting in residential property or specified bonds within defined limits. Even small reporting errors in the capital gains schedule or missing proof can lead to scrutiny. Understanding h

Reassessment under Section 147 allows the Income Tax Department to reopen completed assessments when income is believed to have escaped taxation. These cases usually arise from mismatches in AIS, Form 26AS, high-value transactions, or unreported income discovered later through data analytics. With changes introduced after 2021, the reassessment process now follows a defined notice-based framework under Sections 148 and 148A, with strict timelines and safeguards. Follow-up inc

Wrong PAN reporting in TDS or TCS is one of the most common reasons taxpayers receive unexpected income tax notices. When deductors such as employers, banks, or buyers quote an incorrect PAN in TDS or TCS returns, the tax deducted does not reflect correctly in Form 26AS, AIS, or TIS. This leads to tax credit mismatches, delayed refunds, or demands raised by the Income Tax Department. Such errors are usually procedural, but if ignored, they can escalate into interest, penaltie

Wrong tax regime selection under the Income Tax Act, 1961, often triggers demand notices, refund adjustments, or mismatched tax computations. These issues typically occur when deductions under the old regime are claimed without eligibility, or when the new regime is applied without the required forms. Errors by employers or automated portal calculations can further distort the tax outcome. Early correction prevents unnecessary tax demands, and platforms like TaxBuddy simplif

PAN becoming inoperative due to Aadhaar mismatch is one of the most common reasons for income tax notices and stalled ITR processing. When the two records do not align, the e-filing system blocks refunds, rejects bank validation, and may treat the return as defective under Section 139(9). Notices under Section 143(1) also surface when income or transactions cannot be matched because PAN-Aadhaar is not linked. These issues disrupt the entire compliance cycle, making timely cor

AHigh-Value Transaction notice is issued when the Income Tax Department detects large financial activities that do not appear clearly aligned with the income reported in the return. These notices are not accusations but verification alerts generated through data reported by banks and financial institutions. A timely and accurate online response helps prevent penalties, scrutiny, or reassessment proceedings. Understanding why the notice was issued, which transactions triggered