The Income Tax Department has tightened its grip on fake deductions. It is using data analytics and artificial intelligence to identify cases of fake deductions. It has been found that most cases of fake deductions are related to HRA, health insurance and general donations. If the case of fake deduction claim is proved, the taxpayer can get into trouble. He can even be sentenced to jail.
Action on fake deduction in these sections
Tax experts say that if the case of fake deduction is proved, the Income Tax Department can take action under section 270A. A 200 percent penalty can be imposed on the outstanding tax for wrong reporting. 24 percent interest can be imposed under section 234B and 234C. Not only this, a jail term of up to 7 years can be given under section 276. The Income Tax Department is being very strict about the cases of fake deduction.
New ITR forms have more disclosures than before
To curb such cases, the Income Tax Department has included more disclosures in the new ITR forms. These include HRA calculations, insurance company details under section 80D, etc. It is important to understand that information about high value transactions of taxpayers is captured in the Annual Information Statement (AIS). In such a situation, cases of fake deduction claims are being caught quickly.
Taxpayers can file ITR-U to rectify the error
Experts say that if a taxpayer feels that he has knowingly or unknowingly claimed a deduction that he is not entitled to, he can file ITR-U. It gives taxpayers a chance to correct the mistake, disclose any missed income and withdraw fraudulent deduction claims. However, it is important to note that filing ITR-U requires taxpayers to pay additional tax. The sooner he files ITR-U, the less additional tax he will have to pay.
Experts are advising to file returns soon
This time the Income Tax Department has extended the deadline for filing returns. Taxpayers can file returns till 15 September. But, taxpayers say that one should not wait for the last date to file returns. There are many benefits of filing returns early. Secondly, taxpayers should claim only those deductions which they are entitled to and for which they have proof. This will help them respond to the notice issued by the Income Tax Department.
