Income Tax Department

Updated: 10-07-2025 10:11:28 AM

What is the Income Tax Department and why are they important?

Income Tax Department is a government agency that is primarily responsible for the collection of income tax on behalf of the Government of India. It enforces income tax laws of India primarily the Income Tax Act, 1961 among others to collect revenue from individuals, firms, companies, societies, local authorities, etc. on behalf of the central government. The Income Tax Department, often referred to as the IT Department, is directly controlled by the Ministry of Finance and is headed by the apex body – the Central Board of Direct Taxes (CBDT).

What are the Key Functions and Activities of the IT Department of India?

The Income Tax Department of India deals with the collection of a single direct tax – income tax which is a tax payable on the income of the individual. The department carries the following key activities:

• Assessing IT Returns: One of the obvious activities that the IT department carries out is assessing the IT returns filed by the taxpayers. They ensure that the assessees have declared their income correctly when filing their taxes.
• Sending Notices for Incomplete/Incorrect ITRs: If the Income Tax assessment is not completed by assessee then the IT department sends notice to them to file their tax returns. The IT department imposes a penalty if the assessee does not take action mentioned in the notice.
• Process Tax Refunds: If an assessee has deposited excess tax then the Income Tax department processes the tax refunds as well. However, the Income Tax department can only process tax refunds if the assessee files ITR and claims refunds.
• Tracking Income Tax Offenders: Most people know that officers from the Income Tax department track down tax offenders and conduct raids often along with other law-enforcement agencies such as the Central Vigilance Commission and State Vigilance Bureau. This is usually carried out in case of assessees concealing information about income, not declaring high-value transactions, maintaining large amounts of undeclared assets and black money, etc.

What is the Relation Between CBDT and the Income Tax (IT) Department?

Central Board of Direct Taxation (CBDT) is a statutory government authority that functions under the rules laid down by the Central Board of Revenue Act, 1963. Primarily the CBDT is responsible for laying down all the rules and methods related to implementation of direct tax policies in India. It is the body that issues orders, circulars and notifications for the implementation of various taxes and tax-related rules/regulations. As income tax is a type of direct tax and the Income Tax Department monitors income tax collection by implementing taxes, the IT department operates according to the guidelines laid down by CBDT through its periodic notices and circulars.

What are the Key Websites Managed and Operated by IT Department in India?

The Income Tax Department of India was one of the first government units to fully adopt Internet technology and offer a wide range of online e-services. The following is a short list of the key websites managed and operated by the Income Tax Department of India:

• Official IT Department Website
• Income Tax e-Filing Website
• TDS Reconciliation Analysis and Correction Enabling System (TRACES) Website
• Central Board of Direct Taxes Website

What are some of the Key Tools that You Can Access for Free on the e-filing Website?

The Income Tax e-filing website offers a wide range of free tools to visitors including:

• Income and Tax Calculator: Helps tax assessees calculate their income and income tax for the applicable assessment year. The calculator includes fields for various income heads such as agricultural income, short term capital gains as well as investments under various sections and rebate u/s 87A to name a few.  
• Deferred Tax Calculator: This calculator can used to calculate the tax liability in case of deferred tax payment as per provisions of AS22.   
• Tax Calculator: This is a simpler version of the tax calculator and can be used to compute tax liability for the applicable assessment year by providing the taxable income of the tax assessee.
• Advance Tax Calculator: This tool can be used to estimate the advance tax payable every quarter based on the taxable income of an assessee.  
• TDS Calculator: This tool provides an easy way to calculate the applicable tax deducted at source (TDS) payable for specific payments made to residents and non-residents.  
• Gratuity Calculator: This calculator available on the income tax department website allows employers to calculate their gratuity pay out along with exemption limits and tax payable on gratuity pay out.   
• House Rent Allowance Calculator: This calculator is offered by the IT department to help tax payers compute their taxable and exempted HRA amounts u/s 10(13A).    

In addition to these tools, one can also download key tax software including:

• IT Return Preparation Software
• Other Forms Preparation Software and
• DSC Management Software

What is an Income Tax Notice and How to Respond If You Get One?

Income Tax notices are sent out by the Income Tax Department to the taxpayers for various reasons including but not limited to incorrect ITR filing, wrong ITR form used, not filing ITR even though credit card bills reported at greater than Rs. 2 lakh annually and more. While receiving an Income Tax Notice is not the ideal situation, in most cases, it is only used by an Income Tax assessing officer to seek clarification/further information regarding any observations in the ITR filing or for not filing ITR.   

Here are the things you need to do if you do get an Income tax notice:

• Read it carefully: Do not get stressed just by looking at the notice sent to you. Calm down and read the notice carefully. Make sure to check the key details such as:
  • Full Name
  • PAN
  • Assessment year
  • Issuing Officer
• Find the Discrepancy: Once you have ensured that the notice is addressed to you, you need to figure out the discrepancy. In most cases, a difference in the amount of tax calculated and tax paid is the cause of the discrepancy. A few types of discrepancies include:

• • Mismatch in TDS amount
  • A discrepancy in IT return filed by you
  • Missing documents
  • Tax returns not filed
  • Investments in the name of dependents, spouse, etc.
  • High-value transactions
  • Random scrutiny
• Create a Plan to Address the Discrepancy: If you receive a notice from the Income Tax department, you need to address it within the stipulated time. Not responding to the notice can prove expensive since fines as high as Rs. 10,000 is imposed on assessees who ignore notices sent by the Income Tax department.

How Can You Join the Income Tax Department?

You must look out for government job vacancy announcements if you want to join the Income Tax Department of India. The announcement will direct you to the websites where you can find the necessary information about the vacancy, online application form, eligibility criteria, test, etc.

By writing civil services examination and opting for Indian Revenue Services, you can become an Income Tax officer. Alternately, you can take the Combined Graduate Level Exam conducted by Staff Selection Commission (SSC) to apply for a job with the IT Departments. If you enter through SSC, you will be first appointed as an Income Tax Assistant and later get promoted to the position of Income Tax Officer after serving as a Tax Assistant for a few years.