Types of Assessment in Income Tax – Complete Guide

Assessment in income tax means checking and confirming a taxpayer’s declared income, deductions, and tax paid. The Income Tax Department uses different types of assessments to ensure that taxpayers have followed the rules correctly.

Let’s understand this through Ramesh’s case. Ramesh is a salaried employee who files his tax return every year. For FY 2023–24, he declared ₹8,00,000 as his total income and paid taxes accordingly. The department may assess his return to verify the accuracy. Here’s how:
 

These assessments help ensure fairness and catch any errors or fraud.

Types of Assessment in Income Tax

The Income Tax Department uses different types of assessments to check whether taxpayers have correctly reported their income and paid the right amount of tax. Each type of assessment serves a specific purpose and follows certain rules. Let’s understand these with simple examples.

Self Assessment 

Self-assessment means the taxpayer calculates their income and the tax to be paid. Let’s understand this through the example of Meena.

Let’s say Meena, who works as a software engineer in Bengaluru. Apart from her ₹9,00,000 salary, she earned ₹50,000 interest from a fixed deposit and ₹30,000 from freelance projects. She also invested in tax-saving schemes under Section 80C.

She adds all her income, claims eligible deductions, and subtracts TDS (Tax Deducted at Source), TCS (Tax Collected at Source), and any advance tax already paid. Whatever tax remains is called self-assessment tax. Meena must pay this amount before filing her Income Tax Return (ITR).

Here’s a breakdown of her calculation:
 

Meena pays ₹12,360 as self-assessment tax before submitting her ITR.

Summary Assessment

Summary assessment is an automatic check of the income tax return without human involvement. The Income Tax Department uses the data already available to them to cross-check the return filed by the taxpayer.

Let’s take the example of Arjun, a marketing manager in Pune. He filed his return for FY 2023–24, reporting a total income of ₹10,00,000. He claimed a TDS credit of ₹55,000 based on the Form 16 given by his employer.

When the department processed Arjun’s return under Section 143(1), their system found only ₹45,000 TDS credit against his PAN. So, the system adjusted the difference and sent him an intimation to pay the balance tax.

Here’s how it looked:
 

Arjun received an intimation to pay ₹10,000 and responded by paying the amount promptly.

Regular Assessment

A regular assessment is a detailed check by an Income Tax Officer to make sure the taxpayer has reported the correct income, claimed only genuine expenses, and paid the right amount of tax.

For example, let’s consider Priya, a self-employed interior designer in Delhi. She filed her income tax return for FY 2023–24, declaring an income of ₹12,00,000 and business expenses of ₹4,50,000. Her case got selected for scrutiny based on specific risk parameters set by the Central Board of Direct Taxes (CBDT).

The Income Tax Department sent her a notice under Section 143(2) before the due date. Priya was asked to submit her books of accounts, invoices, and bank statements. After examining the records, the Assessing Officer found that ₹50,000 of her expenses were not supported by bills and disallowed that amount.
 

Scrutiny Assessment

A scrutiny assessment is a detailed review of a taxpayer’s return by an Income Tax Officer to confirm the accuracy of the income, deductions, and tax declared.

Let’s take the example of Rohit, a businessman in Jaipur. He filed his return for FY 2023–24, showing a total income of ₹18,00,000. A few months later, Rohit received a notice under Section 143(2), informing him that his case had been selected for scrutiny.

The officer asked Rohit to submit supporting documents, like sales records, expense bills, and bank statements. After examining everything, the officer found that ₹2,00,000 of expenses lacked proper bills, and ₹1,00,000 income from interest was not reported.

The officer revised the return and issued a demand notice.
 

Rohit disagreed with the order. He first applied for rectification under Section 154. When it was not resolved, he filed an appeal with the Commissioner of Income Tax (Appeals). If needed, he can continue up to the Supreme Court.

Best Judgement Assessment

Best Judgement Assessment occurs when a taxpayer is non-compliant, prompting the AO to estimate income and issue an assessment order.

Let’s understand this with the example of Karan, a shop owner in Lucknow. For FY 2023–24, Karan did not file his income tax return by the due date. Later, he received a notice asking him to submit his books of accounts. He ignored the notice and did not respond, even after reminders.

Since Karan didn’t respond, the AO used bank records, past returns, and GST data to estimate his income and raised a tax demand under Section 144.
 

The AO gave Karan a chance to explain, but since he didn’t respond, the order stood final. Karan now has to pay the assessed tax along with interest and penalties.

Income Escapint Assessment

Income Escaping Assessment happens when income is missed or under-assessed, allowing the officer to reopen and reassess the case within four years of the assessment year.

Let’s look at an example. Ritu, a freelance graphic designer in Mumbai, filed her ITR for FY 2021–22, declaring an income of ₹10,00,000. However, later the department found through bank records that she had received an extra ₹3,00,000 from foreign clients, which she had not reported.

As this income had escaped assessment, the officer issued a notice under Section 148 to reopen her case.

Here’s how the reassessment looked:
 

Since reassessments involve legal procedures, Ritu took help from a Chartered Accountant to handle the case smoothly and avoid penalties.

Conclusion

Understanding the types of assessment in income tax is important for every taxpayer. These assessments as self-assessment, summary, scrutiny, best judgment, and income escaping, help the Income Tax Department verify that the correct income is reported and the right tax is paid.

While some assessments are automatic and quick, others involve detailed checks and notices. If you file your return on time, declare all income honestly, and respond to any notice properly, you can avoid stress and penalties.

Tax rules can be tricky at times, so if your case involves reassessment, scrutiny, or missing income, it's wise to consult a Chartered Accountant. Staying aware and careful ensures a smooth and hassle-free tax experience.

FAQ’s

What is self-assessment in income tax?
Self-assessment means the taxpayer calculates and pays tax before filing the return based on their total income and deductions.

What happens in a summary assessment?
In a summary assessment, the system automatically checks the return for errors or mismatches without human involvement.

When does scrutiny assessment take place?
Scrutiny assessment happens when the tax officer wants to verify the return in detail using documents and records.

What is a best judgment assessment?
The officer uses available data to estimate income when the taxpayer fails to file returns or respond to notices.

Can the tax officer reopen an old case?
Yes, if income has escaped assessment, the officer can reassess it within the allowed time limit.

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