Assessment Procedure: formula sheet

Key formulas

Self-assessment tax

Tax + surcharge + cess − advance tax − TDS − TCS − reliefs/credits

Pay the balance before filing. If the result is negative, it is a refund claim. Interest is shown as a separate item (see the next formula).

Interest payable with the self-assessment tax

Interest for late filing + interest for shortfall in advance tax + interest for deferment of instalments

These interest amounts are paid along with the self-assessment tax before filing. A return is treated as defective if the self-assessment tax and interest are not paid before filing.

Interest for late filing

1% per month or part of a month × tax unpaid on the due date

The base is tax after advance tax and TDS/TCS. The period runs from the due date to the date of filing. If no return is filed, it runs to the date of assessment.

Late filing fee

₹5,000; ₹1,000 if total income does not exceed ₹5,00,000

The fee is separate from tax and interest. It is a separate payment. Confirm the amounts in the Act as amended.

Due date: non-audit individual or HUF

31 July after the end of the tax year

For tax year 2026-27, this is 31 July 2027.

Due date: audit cases and companies

31 October after the end of the tax year

This applies to assessees whose accounts need an audit under the Act, and to working partners of such firms. Confirm the full class in ICAI material.

Due date: transfer pricing cases

30 November after the end of the tax year

This applies where a transfer pricing report is required for international or specified domestic transactions.

Updated return: what is barred

No loss return, no lower tax, no new or higher refund

It is only for reporting more income. It is allowed only within the prescribed period and is barred in specified situations such as search or pending proceedings. Extra tax rises as the filing is delayed.

Summary processing: scope of adjustments

Intimation = return as filed ± (arithmetic error + apparent incorrect claim + late-return disallowances + audit-report disallowances + unreported income in tax statements)

Only items visible from the return, audit report and tax statements. No evidence is called for.

Opportunity before adjustment

If adjustment increases tax or reduces refund: prior intimation to assessee, then the response period given in the Act

If no reply, the adjustment is made. If you reply, the reply is considered before the intimation. Take the length of the response period from your ICAI material.

Time limit for intimation

Intimation within the period given in the Income-tax Act, 2025, counted from the point the Act specifies

Do not guess the period or the starting point. Take both, with the section number of the Income-tax Act, 2025, from your ICAI material and quote them together. In a question, apply the period the question gives.

Scrutiny notice time limit

Notice served within 3 months from the end of the tax year (financial year) in which the return is furnished

Counting starts from the end of the tax year in which you filed, not from the filing date. Take the section number of the Income-tax Act, 2025 from your ICAI material and quote it with the period. In a question, apply the period the question or the material gives.

Transfer pricing extension

Time to complete assessment = ordinary time limit for completing assessment + 12 months extension, where the case is referred to the Transfer Pricing Officer

Never write the extension alone. State the ordinary limit and the extension together, with the section of the Income-tax Act, 2025 from your ICAI material.

Best judgment trigger

Failure to comply with (return notice / notice to produce books or information / scrutiny notice / special audit direction) → assessment on relevant material, after hearing

The trigger presupposes a valid notice. Test the validity and time limit of the notice first. The estimate must be rational. A mere guess is open to challenge in appeal. Quote the section of the Income-tax Act, 2025 from your ICAI material.

Single point of communication

All communication with the assessee = through NaFAC only

Assessment, verification, technical and review units do not contact you directly. Notices, show-cause notices and the final order all come through NaFAC.

Flow of the procedure

Notice → Reply → Enquiry by units → Show-cause notice + draft order (if adverse variation) → Reply → Review → Final order

Use this sequence as the skeleton of any written answer. The show-cause step arises only where a variation prejudicial to you is proposed.

Roles of the four units

Assessment = analyses and drafts | Verification = enquiries and facts | Technical = legal and technical opinion | Review = reviews draft order

Questions often ask which unit does what. Do not mix up the technical and verification units.

Mode of reply and hearing

Reply = electronic | Personal hearing = video conferencing, on request and with approval

There is no physical appearance before the faceless authorities. State the conditions for a hearing carefully.

Time limit for reply

Reply due within the time stated in the notice

Quote the exact period only if you are sure of it from the Rules or the study material. Otherwise say 'within the time specified in the notice'.

General time limit for notice

Notice date ≤ end of relevant tax year + 3 years

Applies to every case where the extended 5-year condition is not met.

Extended time limit

Notice date ≤ end of relevant tax year + 5 years, if escaped income ≥ ₹50,00,000

The escaped income must be represented in the form of an asset, expenditure in respect of a transaction or in relation to an event or occasion, or entries in the books of account. Below ₹50 lakh, the 3-year limit applies.

Show-cause reply time

Time to reply: reasonable time as specified in the notice

The AO must consider your reply before passing the order on whether it is a fit case. Do not quote a fixed number of days as the minimum or maximum unless your updated study material gives it.

Order of procedure

Information → inquiry (optional) → show-cause notice with the information → your reply → AO's order → approval → reassessment notice with copy of order

A notice issued without following this chain is open to challenge.

Approval rank

Within 3 years: Principal Commissioner or Principal Director, or Commissioner or Director. Beyond 3 years: Principal Chief Commissioner or Principal Director General, or Chief Commissioner or Director General.

Approval must be taken before the notice is issued. The time is counted from the end of the relevant tax year.

Completion of reassessment

Reassessment order to be passed within the period prescribed in the Act

The completion period has been amended in the past. Verify the exact period from the current text of the Act and your updated study material.

Rectification: scope

Mistake apparent from the record → the authority that passed the order may amend it

Debatable points or a change of opinion do not qualify. Amendments that increase tax or cut a refund need notice and a hearing.

Rectification: time limit

Within 4 years from the end of the tax year in which the order was passed

Count from 31 March of the tax year of the order, not from the order date. On an assessee's application, the authority must dispose of it within the period prescribed under the Act. Check the exact period in the Income-tax Act, 2025 before you state it in an answer.

Revision by Commissioner (own motion): conditions

Order erroneous AND prejudicial to the interest of revenue

Both conditions are needed. Examples are an unenquired claim or an incorrect allowance. A mere low tax outcome alone is not enough.

Revision by Commissioner (own motion): time limit

Within 2 years from the end of the tax year in which the order was passed

The Commissioner cannot revise a point that is pending in appeal or has already been decided in appeal. He may still revise other points in the same order.

Revision on assessee's application

Application within 1 year from the date of communication of the order

The Commissioner can reduce or cancel the liability, but cannot increase it. Generally, if you have already filed an appeal on the same order, revision is not available.

Appeal to Commissioner (Appeals)

Within 30 days of service of the notice of demand or the date the order is communicated

The Commissioner (Appeals) may admit a late appeal if there was sufficient cause for the delay.

Appeal to Appellate Tribunal (ITAT)

Within 60 days from the date the order is communicated

Both the assessee and the department can appeal. For a cross-objection by the other side, the time limit is 30 days from receipt of notice of the appeal memo.

Appeal to High Court

Within 120 days from the date of receipt of the Tribunal's order; only on a substantial question of law

The period runs from receipt of the order by the assessee or the Principal Commissioner/Commissioner. Confirm the section number under the Income-tax Act, 2025 before citing it. Study the detailed rules in the topic on appeals to the High Court and Supreme Court.

Quick revision

• Know the sequence: return, processing, scrutiny, order, reopening, correction, appeal.
• Self-assessment tax is the tax left after adjusting TDS, TCS, advance tax and reliefs. It must be paid, with interest, before the return is filed.
• Processing of a return is not the same as scrutiny assessment.
• Scrutiny requires a notice to the taxpayer within the prescribed time.
• Faceless assessment works through electronic communication and team-based allocation.
• Reassessment needs income that has escaped assessment and the prescribed approval and notice.
• Reopening is subject to time limits that depend on the amount of escaped income. Take the exact periods, thresholds and approval requirements from the ICAI material for the Income-tax Act, 2025, and note the starting point of each limit.
• Rectification corrects mistakes apparent from the record.
• Revision orders depend on error and prejudice to revenue or on taxpayer application.
• Appeal route: the first appeal generally lies to the Commissioner (Appeals), conducted through the faceless appeal scheme for most cases, with some exceptions. Then the ITAT, then the High Court on a substantial question of law, then the Supreme Court.
• Always check the time limit and its starting point before concluding.
• Write answers as provision, facts, conclusion.

Common mistakes

• Using 31 July for every assessee. Fix: Tie the date to the category. Audit cases and companies use 31 October, and transfer pricing cases use 30 November.
• Charging late-filing interest on the gross tax. Fix: Take the base as tax less advance tax, TDS and TCS, as on the due date.
• Treating processing as full assessment and thinking the officer can ask for evidence. Fix: In processing, only apparent items are adjusted. Any inquiry or evidence needs scrutiny with a notice.
• Counting the scrutiny notice time limit from the date of filing the return. Fix: Count 3 months from the end of the tax year (financial year) in which the return is furnished. Convert the filing date to 31 March of that year first.
• Saying the local assessing officer will call the assessee for a physical hearing. Fix: Write that all communication is through NaFAC and electronic, and that any hearing is by video conferencing on request with approval.
• Treating NaFAC as the unit that does the assessment work. Fix: NaFAC is the central point that issues notices and orders. The ReFAC units (assessment, verification, technical, review) do the work.
• Counting the time limit from the date of the return or the original assessment. Fix: Always count from the end of the relevant tax year (31 March). Then add 3 or 5 years.
• Applying the 5-year limit to any escaped income above ₹50 lakh. Fix: State that the income must be represented in the form of an asset, expenditure in respect of a transaction or in relation to an event or occasion, or entries in the books of account. Only then does the extended limit apply.
• Using rectification for a debatable legal point or a changed opinion. Fix: Ask whether a reasonable person could disagree. If yes, it is not rectification. Take an appeal or seek revision.
• Counting the rectification or revision period from the order date. Fix: For rectification and revision by the Commissioner, start from the end of the tax year in which the order was passed (31 March), then add 4 years or 2 years.

Exam tips

• Start every case answer with the assessee category and its due date. Most marks depend on this one step.
• Show the interest calculation line by line. Partial credit is given for the correct base and period even if the final figure is off.
• In MCQs, check the return type first. Many wrong options differ only in naming the return belated instead of revised, or updated.
• Check the time limits and the additional tax slabs for belated, revised and updated returns in the latest ICAI material. These limits were amended recently, so do not rely on old notes.
• Use the 2025 Act's terms: write tax year, not assessment year.
• Write the type of assessment in the first line of every answer. It gives the examiner an easy mark.
• In case scenarios, convert the date before counting months. For the scrutiny notice, move to the end of the tax year (31 March) and add 3 months. For intimation, use the period and starting point given in the question or your ICAI material. Show the working.
• For differences between scrutiny and best judgment, use three columns in words: trigger, officer's power, and safeguard.