Income Tax Assessment Year 2024-25

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Assessment In Income Tax - Overview

Income tax assessment is the process by which the income tax department determines the amount of income tax you owe for a particular financial year. This is done by reviewing the information you provide in your income tax return (ITR).

What is an Income Tax Assessment Order?

An Income Tax Assessment Order is a formal document issued by the Income Tax Department after they've reviewed your Income Tax Return (ITR) for a specific financial year. It's the final word on your tax liability for that year, acting as a report card from the department.

The assessment order typically includes the following:

Your assessed total income: This is the sum of all your taxable income from various sources like salary, business income, capital gains, etc.
Deductions and exemptions allowed: Any deductions or exemptions you claimed in your ITR will be listed here, along with their specific amounts.
Taxable income is your total income minus the allowed deductions and exemptions.
Applicable tax rate: Based on your taxable income and the prevailing tax slabs for that year, the order will specify the tax rate you're liable for.
Tax payable/refund due: This is the final figure – the amount of tax you need to pay to the government if your tax liability exceeds the tax already deducted at source (TDS) or the amount you're due as a refund if the TDS was higher than your actual tax liability.

What Is an Assessment Year In Income Tax?

In income tax, the assessment year refers to the 12-month period during which your income earned in the previous financial year is assessed and taxes are calculated. It's the timeframe for settling your tax affairs for a specific financial year.

Financial Year: This is from 1 April of one year to 31 March of the next year when you earn your income.For example, the current financial year is from 1 April 2024 to 31 March 2025.
Assessment Year: This is the year following the financial year, where your income earned in the previous financial year is assessed, and the tax liability is determined. For the current financial year (1 April 2024 to 31 March 2025), the assessment year will be 2025-26.

What Is an Assessment Year In Income Tax?

Types of Income Tax Assessment

Self-Assessment under Section 140 A

How to do Self-Assessment:

Assess the income you have earned during the financial year.
Calculate your total taxable income.
Deduct eligible exemptions and deductions.
Calculate the tax liability.
Pay the tax due.
File the income tax return.

Summary Assessment under Section 143(1)

How Summary Assessment Works:

The income tax department processes the return and computes the tax liability.
Discrepancies, if any, are communicated to the taxpayer through an intimation.
No personal appearance is required.

Who is Eligible:

Individuals and entities whose returns are filed without any discrepancies.

How to File for Summary Assessment:

File the income tax return online.
Receive and review the intimation sent by the income tax department.

Regular Assessment

Regular assessment involves the assessing officer's detailed examination of the taxpayer's income and expenses.
It may require the taxpayer to attend hearings and provide supporting documents.
Applicable when there are complexities or discrepancies in the filed return.

Scrutiny Assessment under Section 143(3)

How to Prepare for Scrutiny Assessment:

Maintain accurate and detailed financial records.
Be ready to provide supporting documents and explanations for any discrepancies.
Attend hearings as required.
Cooperate with the assessing officer.

Best Judgement Assessment under Section 144

How to Avoid a Best Judgment Assessment:

File an accurate and complete income tax return.
Provide all necessary documents and explanations during scrutiny.
Cooperate with the assessing officer to address any concerns.

How to Prepare for a Best Judgment Assessment:

Ensure accurate and complete record-keeping.
Be ready to explain any discrepancies.
Cooperate with the assessing officer during the assessment process.

Income Escaping Assessment under Section 147

This is initiated when the assessing officer has reason to believe that some income chargeable to tax has escaped assessment.
The assessing officer issues a notice to the taxpayer to reassess the income.

Documents Required for Income Tax Assessment

Along with other forms, the following documents should be provided to file your income tax returns online:

General Documents:

PAN card
Aadhaar card
Bank account statements
Form 26AS
Copies of ITR for relevant assessment years

Income-Specific Documents:

Salary: Form 16, salary slips
Business/Profession: Profit and loss account, balance sheet, bank statements, GST returns
Capital gains: Sale deed, purchase deed, cost of improvement records
House property: Rent agreement, municipal tax receipts, interest certificates on home loans
Other sources: Interest certificates, dividend statements, etc.

Documents Required for Income Tax Assessment

When is the Income Tax Assessment Order Issued?

Summary Assessment: Within 1-2 months of filing ITR.
Regular Assessment: Within 12 months from the end of the assessment year (usually 31 March).
Scrutiny Assessment: Within 24 months from the end of the relevant assessment year.
Best Judgment Assessment: Within nine months from the end of the financial year in which the assessment is made.

How Is an Income Tax Assessment Order Generated?

Assessment Proceedings: The tax officer examines the supporting documents for ITR and may seek further clarification.
Calculation of Tax Liability: The officer determines total income, applicable deductions, and tax payables.
Drafting of Assessment Order: The Officer prepares a detailed order outlining assessment findings, tax calculations, and any penalties or interest applicable.
Issue of Assessment Order: The order is issued to the taxpayer through the online portal or physical delivery.

Assessment In Income Tax FAQs

How is an Income Tax Notice Issued for Scrutiny Assessment?

When your ITR is selected for scrutiny assessment, you will receive a notice from the tax department through your registered email address, e-filing portal account, or physical mail. The notice will specify the reasons for scrutiny, the documents required, and the response deadline.

Is there a time limit for Income Tax Assessments?

Summary Assessment: Within 1-2 months of filing ITR.
Regular Assessment: Within 12 months from the end of the assessment year (usually 31 March).
Scrutiny Assessment: Within 24 months from the end of the relevant assessment year.
Best Judgment Assessment: Within nine months from the end of the financial year in which the assessment is made.
Income Escaping Assessment: No specific time limit; can be initiated anytime based on information or suspicion of unassessed income.

Which type of assessment applies to me?

It depends on various factors like your total income, income sources, discrepancies in ITR, and filing history. Here's a general guide:

Summary Assessment: Individuals with income below specified limits and no major discrepancies in ITR.
Regular Assessment: Most taxpayers don't fall under summary or scrutiny criteria.
Scrutiny Assessment: This may be triggered due to high income, complex transactions, inconsistencies in ITR, or suspicious activity.
Best Judgment Assessment: If you fail to file ITR or provide inadequate information.
Income Escaping Assessment: If the department suspects unassessed income in previous years.

What should I do if I am selected for scrutiny assessment?

Gather all supporting documents for income, deductions, and expenses as mentioned in the notice.
Respond promptly to the notice within the specified deadline.
Talk to our CA at Vakilsearch
Cooperate with the tax authorities and provide any requested information clearly.

What should I do if I disagree with the outcome of my assessment?

You can file a rectification petition online or offline within a specified timeframe (usually 30 days), highlighting any errors or discrepancies in the assessment order.
If the rectification is unsuccessful, you can appeal to the Commissioner of Income Tax (Appeals) and further to the Income Tax Appellate Tribunal (ITAT).

Is receiving an Income Tax Assessment Order mandatory?

Yes, receiving an assessment order is mandatory for all taxpayers. It legally determines your tax liability and any outstanding dues. Ignoring the order can lead to penalties and legal consequences.