Many individuals in India—whether salaried professionals, freelancers, or small business owners—often feel uncertain or stressed about what happens after filing their tax returns.
With the Income Tax Department now leveraging digital tools like the AIS (Annual Information Statement) and TIS (Taxpayer Information Summary), tax filings are being scrutinized more closely than ever. That means accuracy matters—and understanding the post-filing process is essential.
In this guide, I’ll explain what income tax assessment really involves, the different types of assessments, when and why they occur, and what you should do if your return is selected for review.
Whether you’re earning a regular salary, running a side hustle, or managing your own business, this guide will help you stay prepared—and stay confident.
What Is Income Tax Assessment?
Income tax assessment is the process where the Income Tax Department (ITD) reviews the information you’ve submitted in your Income Tax Return (ITR).
They check if the income, deductions, and taxes reported by you match the data they have—like from your TDS certificates, bank interest reports, GST returns, high value financial transactions, buying and selling of securities, dividend, or investment records.
This helps ensure:
- You’ve paid the right amount of income tax.
- You haven’t missed reporting any income.
- You’ve claimed tax deductions and exemptions fairly.
The ITD uses both automated systems and manual checks. Based on their findings, they can either:
- Issue a tax refund, if you’ve paid more tax.
- Send a notice or demand, if there’s a mismatch or unpaid tax.
Types of Income Tax Assessment in India
There are six major types of assessments you should know about. Let’s explore each with a simple explanation and a relatable example.
Self-Assessment: Do-It-Yourself Tax Calculation
This is where you calculate your income and tax, adjust for any TDS/TCS or advance tax paid, and pay the remaining amount before filing your return.
It’s your legal responsibility to ensure your return is complete and accurate.
Let’s say you’re a freelance graphic designer earning ₹8 lakh in a year. You calculate your tax after deductions under Section 80C, deduct tax (TDS) already paid by clients, and pay the balance as self-assessment tax before filing your ITR.
Always verify your TDS using Form 26AS or AIS before paying self-assessment tax to avoid double payment.
Also Read: Last date of filing Income Tax Return in India
Summary Assessment (Section 143(1)): Quick, Automated Checks
Also known as intimation processing, this is done entirely by the system, without human involvement.
To automatically catch math errors, wrong deductions, or mismatches in TDS.
You file your ITR and claim ₹80,000 as TDS. But the IT department finds only ₹60,000 against your PAN. They issue an intimation under Section 143(1), asking you to pay the ₹20,000 difference.
Most people never face an audit—but many receive these automated intimation notices. Don’t panic. Just review and respond appropriately.
Regular Assessment (Section 143(3)): Manual Scrutiny by Officer
This is a detailed review done by an Assessing Officer (AO) if your return is selected for scrutiny.
To verify that you’ve neither:
- Understated income
- Overstated expenses
- Underpaid tax
Let’s say you run a home bakery and report ₹4 lakh in profit on sales of ₹20 lakh. If this seems too low based on industry norms, your return might be picked. The AO may ask for:
- Sales records
- Expense bills
- Bank statements
Based on this, they’ll pass an assessment order confirming or modifying your return.
Keep all your records—like invoices, receipts, and digital payments—organized for at least 6 years. It helps in case of a scrutiny.
Scrutiny Assessment (Section 143(2)): Deep Dive with Document Requests
A type of regular assessment triggered when your return is selected for detailed scrutiny.
To investigate complex, high-value, or unusual entries in your return.
Suppose you’re an online seller who claimed a large deduction for business expenses, but your income seems under reported. The ITD might send you a notice under Section 143(2) asking for:
- Purchase invoices
- Warehouse rent agreement
- GST returns
You’ll need to submit these for the officer to validate your claims.
If you disagree with the final assessment, you can appeal to higher authorities like CIT(A), ITAT, and even the High Court or Supreme Court.
Best Judgement Assessment (Section 144): Officer Assesses Without Your Input
If you fail to respond to notices, don’t file returns, or skip audits, the officer will make the best judgment based on available info.
To prevent tax evasion and ensure compliance when the taxpayer is uncooperative.
A mobile repair shop owner ignores several ITD notices and doesn’t submit any books. The AO uses past trends, bank deposits, and supplier info to estimate income and pass an assessment order.
Even under best judgment, the department must give you an opportunity to explain before finalizing the order.
A Best Judgment Assessment is made when:
- You fail to file an income tax return
- You do not respond to notices
- You do not provide required documents
- The provided data is unreliable
In such cases, the officer estimates your income and tax liability based on available information and makes an assessment accordingly.
Income Escaping Assessment (Section 147): Reopening Old Cases
If the ITD discovers that some income was not reported earlier, they can reopen past assessments.
To recover taxes on undisclosed income, especially in cases involving:
- Foreign assets
- High-value transactions
- Fake deduction claims
If a freelancer fails to report income from a foreign client in FY 2021-22, the AO can reopen the case by sending a notice under Section 148.
For small omissions under ₹50 lakh, reopening can happen within 3 years. For larger cases, this window extends up to 10 years.
Penalty for Not Filing Income Tax Return (ITR) on Time
The Income Tax Department imposes penalties for failure to file the Income Tax Return (ITR) within the prescribed due dates.
For non-audit cases relating to the Financial Year 2024–25 (Assessment Year 2025–26), the original due date for filing the ITR was 31st July 2025. However, the Central Board of Direct Taxes (CBDT) has extended the deadline to 15th September 2025.
The penalties applicable for late filing or non-filing of the ITR are detailed below:
Late Fees:
- Up to ₹5,000 if your income is over ₹5 lakh
- ₹1,000 if your income is below ₹5 lakh
- Nil if your income is below the basic exemption limit
Interest: 1% per month on the unpaid tax amount under Section 234A
Even if you missed the deadline, file your return ASAP to minimize penalties and interest.
Conclusion
Income tax assessment might sound intimidating, but it’s really about ensuring everyone pays their fair share—nothing more, nothing less.
Whether you’re a freelancer designing logos, a home baker selling cupcakes, or a salaried professional, knowing the different types of tax assessments empowers you to stay compliant, avoid penalties, and protect your peace of mind.
Remember, assessments don’t always mean trouble. Often, they’re just routine checks. But being informed helps you respond wisely and confidently. And if things feel too technical, don’t hesitate to consult a tax expert—think of it as an investment in your financial health.
Frequently Asked Questions – Income Tax Assessment in India
Income tax assessment in India can seem complex, especially when you’re dealing with notices, different assessment types, or legal terms. To help you navigate it better, we’ve answered some of the most commonly asked questions by taxpayers—whether you’re salaried, self-employed, or running a business.
This section will give you clarity on assessments under various sections like 143(1), 143(3), 144, and more, with simple explanations and real-world relevance.
I missed responding to an income tax notice within the deadline. Will my return still be assessed?
Yes. If you do not respond to a notice within the allotted time, the Assessing Officer may conduct a Best Judgment Assessment under Section 144. This means your income will be assessed based on the officer’s best judgment, using the information available with the Income Tax Department.
What is a scrutiny assessment under Section 143(3)?
A scrutiny assessment is a detailed examination of your income tax return. The Assessing Officer reviews your income, deductions, exemptions, and other financial details to verify their accuracy. You will receive a notice under Section 143(2) and may be required to submit supporting documents, books of accounts, and other records.
Who is considered a ‘person’ under the Income Tax Act?
As per the Income Tax Act, the term ‘person’ includes the following:
- Individual
- Hindu Undivided Family (HUF)
- Company
- Partnership Firm
- Association of Persons (AOP) or Body of Individuals (BOI)
- Local Authority
- Artificial Juridical Person
What is an intimation order under Section 143(1)?
An intimation order is a communication sent by the Income Tax Department after processing your income tax return. It informs you whether:
- The return has been accepted as filed
- Any errors or mismatches were found
- Any additional tax is payable or refundable
What does ‘assessment’ mean in income tax?
An income tax assessment is the process of verifying the information you submit in your ITR. The Income Tax Department checks your reported income, deductions claimed, taxes paid, and overall tax liability to ensure everything is correct as per law.
What are the different types of income tax assessments?
The key types of income tax assessments in India include:
- Self-Assessment (Section 140A): You calculate your tax and pay any balance due before filing your return.
- Summary Assessment (Section 143(1)): A preliminary check of your ITR by the department to correct mathematical errors or mismatches.
- Scrutiny Assessment (Section 143(3)): A detailed review to ensure no under-reporting or incorrect claims.
- Best Judgment Assessment (Section 144): If you fail to file returns or provide documents, the officer estimates your income based on available data.
- Income Escaping Assessment (Section 147): If the department believes that taxable income has escaped assessment, it can reopen your case.
- Protective Assessment: Conducted to safeguard revenue when there’s a dispute over who the real taxpayer is.
- Assessment in Case of Search (Section 153A): When searches or raids are conducted, assessments may be done for up to 6 prior years.
What is the difference between Assessment Year and Previous Year / Financial Year 2024–25?
The Previous Year (also called Financial Year) is the year in which you earn your income. The Assessment Year is the year that follows, in which the income of the previous year is assessed and taxed.
For example:
- Previous Year (PY) / Financial Year (FY): 1 April 2024 to 31 March 2025
- Assessment Year (AY): 2025–26
In this case, income earned during FY 2024–25 will be assessed and taxed in AY 2025–26.
What documents should a salaried individual keep for future assessment?
If you’re salaried, it’s important to keep the following documents safely for at least 6 years (longer if there’s a scrutiny case):
- Form 16 from your employer
- Form 16A from banks or others
- Salary slips for the full year
- Bank account statements
- Form 26AS (Tax Credit Statement)
- Annual Information Statement (AIS) and TIS
- Investment proofs (for deductions under Section 80C, 80D, etc.)
- Rent receipts if claiming HRA
- Loan statements (home loan, education loan)
- Insurance premium receipts
- Capital gains statements (if you’ve sold shares, mutual funds, or property)
These documents help substantiate your claims if your return is selected for scrutiny or reassessment.
What should self-employed individuals do to prepare for future tax assessments?
If you’re self-employed—whether a freelancer, consultant, or running a small business—proper documentation is critical for smooth assessment. Here’s what you should do:
Steps to take:
- Maintain proper books of account, either digitally or in physical form
- File GST returns (if registered under GST)
- Reconcile income declared with bank credits and Form 26AS
- Pay advance tax on time to avoid interest
- File ITR under the correct section (like ITR-3 or ITR-4 depending on your case)
Documents to keep:
- Invoices raised for services or products sold
- Bank statements of all business accounts
- Purchase bills and expense receipts
- Proof of assets (machinery, office equipment, etc.)
- Ledger books, balance sheet, and profit & loss account
- Form 26AS, AIS, and TIS
- Rent agreements, electricity bills if claiming office space deduction
- TDS certificates if clients have deducted tax on your payments
Keeping these organized will help defend your income and deductions if assessed under scrutiny.
How will I know if my return is being assessed?
After you file your Income Tax Return (ITR), the Income Tax Department processes it. You’ll be informed about its status through official communication in two main ways:
Intimation under Section 143(1)
This is a computer-generated notice sent after your return is processed. It tells you if:
- Your return is accepted as it is
- There are any mismatches or errors
- You need to pay more tax or will get a refund
You’ll receive this intimation by email and it will also appear on your income tax e-filing portal.
Notice under Section 143(2)
This means your return has been selected for scrutiny—a detailed review by an Assessing Officer. This is not random; it may happen if:
- There’s a mismatch in income reported vs. Form 26AS or AIS
- High-value transactions weren’t disclosed
- Deductions seem unusually high
You’ll get this notice by email and SMS, and it will also be available on the portal. You must respond within the deadline and may be asked to submit supporting documents or attend a hearing (now mostly done online).
What happens if I ignore a tax notice?
If you ignore a notice—especially under Section 143(2) or follow-up queries—the department may assume you’re non-cooperative.
In such cases, the Assessing Officer has the power to conduct a Best Judgment Assessment under Section 144.
This means:
- The officer will estimate your income and tax liability using the information available to them (like Form 26AS, AIS, bank data, TDS records).
- You won’t get the chance to explain or correct your side.
- This may lead to a higher tax demand, penalties, and even scrutiny in future years.
In short, ignoring a notice can lead to unnecessary complications, even if you’ve filed your return correctly. Always check your email and income tax portal regularly—especially during and after the filing season.
