Income Tax Return: 7 years jail and 200% penalty for claiming fake deduction

Income Tax Return: 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.

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 under 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, up to 7 years of imprisonment can be given under section 276. The Income Tax Department is being very strict about the cases of fake deduction.

More disclosures than before in new ITR forms

The Income Tax Department has included more disclosures in the new ITR forms to curb such cases. 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 soon.

Taxpayers can file ITR-U to correct the mistake

Experts say that if a taxpayer feels that he has knowingly or unknowingly claimed a deduction to which he is not entitled, then he can file ITR-U. It gives taxpayers an opportunity to correct the mistake, disclose any missed income and withdraw fake claims of deduction. However, it is important to note that taxpayers have to pay additional tax on filing ITR-U. The sooner he files ITR-U, the less additional tax he will have to pay.

Experts are advising to file returns early

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 for which they are entitled and for which they have proof. This will help them respond to the notice issued by the Income Tax Department.

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