Types of Assessment in Income Tax | Stay Compliant with Saptax Hub LLP
Types of Assessment in Income Tax, ensuring that taxpayers fulfill their obligations correctly. The Income Tax Act, 1961 prescribes different types of assessments to verify, correct, and reassess tax filings. Whether you’re an individual taxpayer or a business owner, understanding these assessments can help you stay compliant and avoid penalties.
1. Self-Assessment (Section 140A)
Self-assessment is the first step in tax compliance, where taxpayers calculate their own tax liability, deduct advance tax paid, and pay any remaining dues before filing the return. It ensures that taxpayers take responsibility for accurate tax calculations.
2. Summary Assessment (Section 143(1))
Once a taxpayer files their income tax return (ITR), the tax department conducts a summary assessment using an automated system. The system checks for basic errors such as incorrect tax calculations, mismatches in reported income, or missing details. If discrepancies are found, the taxpayer receives an intimation notice to either pay additional tax or claim a refund.
3. Scrutiny Assessment (Section 143(3))
This is a detailed assessment where the Income Tax Department closely examines the taxpayer’s return. The tax officer may request additional documents, proofs of income, deductions, and expenses to verify accuracy. Scrutiny assessments are conducted when there are doubts about income underreporting or excessive deductions.
4. Best Judgment Assessment (Section 144)
When a taxpayer fails to file their return, does not respond to tax notices, or provides inadequate information, the tax officer makes an estimated assessment based on available data. This is known as best judgment assessment, and it often results in higher tax liabilities due to lack of taxpayer cooperation.
5. Income Escaping Assessment (Section 147)
If the Assessing Officer discovers that income has been underreported or escaped taxation, they can reopen the case and reassess the tax liability. This is also known as reassessment or reopening of tax assessment. Cases can be reopened within four to six years, depending on the amount of income concealed.
6. Faceless Assessment (Introduced in 2019)
To promote transparency and reduce human intervention, the Government of India introduced faceless assessments. Under this system, all communications happen digitally, and taxpayers are assigned to tax officers randomly. This ensures a fair and unbiased tax assessment process.
Stay Tax Compliant with Expert Assistance
Understanding the different types of assessments can help you file your returns accurately and avoid unnecessary scrutiny. If you’re looking for professional guidance in tax filing and compliance, Saptax Hub LLP, a leading CA firm in Delhi, can assist you with expert solutions tailored to your needs. Contact us today for hassle-free tax management!
