- Date : 06/09/2023
- Read: 3 mins
The Income Tax Department (ITD) issues clarifications for notices sent to taxpayers for wrongly claiming deductions u/s 80P of the Income Tax Act. Here's what you should know.
The Income Tax Department (ITD) recently inadvertently dispatched notices to taxpayers about incorrect Section 80P deductions, which caused confusion and concern among taxpayers. The problem arose when numerous taxpayers received notices for allegedly erroneous claims of income tax deductions under Section 80P. It appeared to target individuals and entities who may not have been eligible for these deductions.
Highlights:
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The Income Tax Department erroneously issued notices to taxpayers with respect to the Section 80P deduction.
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The ITD has clarified the error, claiming this issue stemmed from a technical glitch within the ITD's system.
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Refunds will be processed for those who paid taxes based on the notices.
However, the ITD has clarified the situation, assuring affected taxpayers that the notices were sent out accidentally. In response to a query on social media, the ITD acknowledged the issue, stating that the intimation u/s 143 (1) of the Income-tax Act, 1961, containing the error description for Schedule 80P, claiming the deduction u/s 80P(2)(e) being ineligible for income other than rental income, has been sent inadvertently. The department also expressed regret for any inconvenience caused.
Also Read: Income Tax Notice Alert: How To Navigate Faceless Assessments With Ease.
What should taxpayers know regarding these notices?
The ITD attributed the error to a technical glitch within its system. Importantly, they have assured taxpayers that they will not face penalties for the mistaken notices, and those who have already paid taxes based on these notices will receive refunds.
This error only impacts taxpayers who have filed income tax returns for the assessment year 2023-2024. If you have claimed Section 80P deductions for other assessment years, you are not affected.
What is Section 80P?
Section 80P of the Income Tax Act is a provision that allows for deductions in the calculation of taxable income for certain cooperative societies.
This deduction promotes and incentivises cooperative activities, including banking, cottage industries, the marketing of agricultural produce, and more. The deduction amount is determined by the type of activity the society is engaged in. For instance, profits and gains attributable to specific activities, like banking or agricultural produce marketing, are eligible for a 100% deduction. However, there are income thresholds for certain activities, like consumer cooperative societies.
Section 80P benefits individuals, Hindu Undivided Families (HUFs), companies, and firms by reducing their taxable income and their tax liability. It thus encourages the development of cooperative societies, particularly those engaged in rural and agricultural sectors.
What should taxpayers do?
If you have received these mistaken notices, the ITD is working to rectify this situation. Don’t panic and don’t take any immediate action. Wait for further instructions from the department, which will be communicated through email in the next few days.
Find the latest articles on tax planning here.
Also Read: Income Tax Calender 2023: Upcoming due dates and deadlines for September 2023
Disclaimer: This article is intended for general information purposes only and should not be construed as insurance or investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.
