ITR fake deductions claim Penalty Rules: Using fake rent receipts to claim tax exemption or deduction while filing ITR can attract heavy penalty. The Income Tax Department has issued notices to many taxpayers.
New Delhi: One should be very careful while claiming tax exemptions and deductions while filing Income Tax Return (ITR). The Income Tax Department may ask for proof of deductions and exemptions claimed in the ITR while processing the ITR filed for the current year or even previous years. The Income Tax Department is sending notices to those who have submitted fake rent receipts.
Taxpayers can provide proof of tax exemption or deduction claimed in ITR, so they need not worry about claims. However, if the person is unable to provide proof or the Income Tax Department is not satisfied with the proof, the claimed deduction and exemption will be treated as unproven. In such cases the Income Tax Department can impose penalty. According to tax experts, claiming wrong deductions leads to wrong reporting of income.
Diwakar Vijayasarathy, founder and CEO of business consulting group DVS Advisors, says that claiming higher HRA exemption on the basis of fake rent receipts or claiming deduction under Chapter VI-A without documentary evidence would amount to misrepresentation or suppression of facts. Under the Income Tax Act, 1961 this is considered as misreporting of income. Recently, the Income Tax Department has sent notices to salaried taxpayers asking for evidence related to the deduction claimed in ITR filing for the financial year 2021-22 (AY 2022-23).
Abhishek Soni, CEO of ITR filing website Tax2Win.in, says that the Income Tax Department has observed that taxpayers are claiming bogus deductions and exemptions to claim tax refunds while filing ITR. Note that the Income Tax Department can track these fake people. For example, if a person while claiming deduction for HRA has mentioned that the rent has been paid to the parents and if the parents have failed to report this rental income in their ITR, then the Income Tax Department will consider such cases. Can identify and send a notice as well as impose a hefty fine.
What is the penalty for making a wrong claim or providing information?
If the taxpayer does not provide documentary evidence, then the Income Tax Department can impose penal interest as well as penalty for misrepresentation of income. According to experts, under Section 270A of the Income Tax Act, a fine equal to 200% of the tax payable on such misreported income will be imposed. Apart from this, interest can also be included in the fine. On the other hand, for under-reporting of income, the Income Tax Department can impose a penalty of up to 50% of the tax payable along with applicable interest.
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