How to respond to Non-filing of IT Return Notice?

Important Keyword: Income Tax Compliance, Income Tax Website, IT Notice.

What is Non-Filing Monitoring System (NMS)?

The Non-Filing Monitoring System (NMS) is a system developed by the Income Tax Department to identify individuals who are required to file taxes but have not done so. Here’s how it works:

Identification of Non-filing

The NMS identifies people who are liable to file taxes—those with an annual income exceeding ₹2,50,000—but have not filed their tax returns. The system leverages several information sources to spot these non-compliant taxpayers:

• AIR (Annual Information Return): Filed by financial institutions, providing details of high-value financial transactions.
• CIB (Centralised Information Branch): Collects and processes data related to potential tax evaders.
• TDS Statements: Details of tax deducted at source, which help in tracking the income of individuals.

Notification Process

Once potential non-filers are identified, the NMS automatically sends a non-compliance email to the taxpayer’s registered email address. The Income Tax Department also sends notifications via SMS and email every year to inform non-filers of their obligation to submit their returns.

Sample email from Non-filers Monitoring System

How to respond to NMS compliance email?

Here is a step by step guide on how to deal with non-filers monitoring system email

1. Visit Income Tax Portal
   Login Income Tax Website.
   
   
2. Navigate to Compliance
   Click on View and Submit Compliance.
   
   
3. You will see the Submit Compliance Form.
   Navigate to Filing of Income Tax Return.
   
   
4. Navigate to Asssessment Year for which Return Not Received.
   You have two options to respond:
   A. ITR has been filed,
   B. ITR has not been filed.
5. If you select option (A), you need to provide:
   1. Mode of filing the ITR,
   2. Date of filing the ITR,
   3. An acknowledgement Number.
6. If ITR was e-Filed,
   details will be prefilled automatically.
   
   
7. If you select option (B), you need to provide one of the following reasons:​​
   1. Return under Preparation,
   2. Business has been Closed,
   3. No Taxable Income,
   4. Others.
8. Navigate to Related Information Summary.
   It gives a detailed information summary.
   
   
9. Choose a relevant option under Information Related To against each transaction mentioned
   Provide additional information if required.
   
   
10. Following are the options available to a taxpayer under Information Relates To tab:
    1. Self-Investment/ expenditure is out of exempt income
    2. Self-Investment/ expenditure is out of accumulated savings
    ​3. Self-Investment/ expenditure is out of gifts/ loans from others
    ​4. Self-Investment/ expenditure is out of foreign income
    5. Self-Income from a transaction is exempt 
    ​6. Income from a transaction is below taxable limit 
    ​7. Self-Income from transaction relate to different AY 
    ​8. Self-Not Known
    ​9. Other PAN 
    ​10. Not Known 
    ​11. I need more information
11. Upon submission you will see following screen.
    Download Response.pdf for your future reference.
    
    

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Official Income Tax Return filing website: https://incometaxindia.gov.in/