In recent months, many taxpayers across india have received unusual notices from the Income Tax Department (ITD) asking for details of their personal expenses, including grocery bills, haircut costs, perfume purchases, fuel expenses, and even small cash transactions.

This has raised alarm and confusion among taxpayers: Why would the tax department want details of everyday expenses? Here’s a clear explanation.

1. The Reason Behind Such Notices

The IT Department has been increasingly using data analytics and risk assessment tools to identify cases where reported income does not match lifestyle.

· Tax authorities compare your declared income with bank statements, credit card transactions, and lifestyle spending patterns.

· If your expenses appear higher than your reported income, the department may send a notice asking for proof of spending and source of funds.

· Common examples include:

o Frequent large purchases (electronics, perfumes, luxury items)

o High grocery bills inconsistent with declared income

o Cash withdrawals not data-aligned with income

o lifestyle expenses such as salon visits or fuel for high-end vehicles

Essentially, the ITD wants to verify that you are paying tax proportionate to your actual lifestyle and income.

2. Are These Notices a Sign of Wrongdoing?

Not necessarily. Receiving such a notice does not mean you have done anything illegal. The department’s goal is often clarification, not immediate penalties.

· Notices are part of routine scrutiny or risk assessment procedures.

· Many genuine taxpayers receive these notices simply because their spending pattern appears higher than declared income, even if everything is legitimate.

3. How to Respond Correctly

If you receive such a notice, follow these steps:

Step 1: Do Not Panic

· Notices are common, and the department often just seeks clarification or documents.

· Ignoring the notice can lead to further notices or assumptions of underreporting.

Step 2: Gather Documents

· Collect bills and receipts for the requested expenses (grocery, haircut, fuel, etc.)

· Organize bank statements, credit card statements, and cash withdrawal proofs

· Keep records of any loans or gifts that may explain large expenses

Step 3: Respond Through Official Channels

· You can submit responses online via the Income Tax e-filing portal

· Attach scanned copies of receipts and supporting documents

· Provide a brief explanation of any unusual or high expenses

Step 4: Maintain Professional Tone

· Be factual and concise in your response

· Avoid unnecessary details or emotional arguments

· Clarify legitimate sources of funds for any large cash transactions

4. Tips to Avoid Future Notices

1. Maintain proper bills and receipts for all significant expenses

2. Pay digitally wherever possible, as wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital trails make explanations easier

3. Declare all income, including gifts, capital gains, and interest

4. Avoid large cash transactions that do not match your declared income

5. Keep track of lifestyle expenses versus reported income

5. Key Takeaways

· Notices asking for haircuts, groceries, perfume, and small cash transactions are usually routine verification notices.

· It does not imply wrongdoing if you can substantiate your expenses with bills and statements.

· Always respond promptly and accurately with supporting documents.

· Maintaining digital and organized records is the best way to prevent unnecessary scrutiny in the future.

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.