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Fake Tax Claims Can Get You In Trouble Research Team | Posted On Friday, April 20,2018, 07:35 PM

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Fake Tax Claims Can Get You In Trouble



The Income Tax Department is chasing salaried tax evaders. In an interesting case a few months ago, the investigation wing of the IT Department, detected a tax refund fraud. Employees of reputed IT Companies like Infosys, Vodafone and IBM took the help of a chartered accountant in Bengaluru, to file inflated/false claims showing loss from house property.

This CA filed nearly 1,000 fraudulent ITRs, costing the Income Tax Department, more than 18 Crores. The IT Department raided the premises of this chartered accountant and claimed to have found bogus claim documents, along with WhatsApp chats.

This is not an isolated case. Employees of IBM, Vodafone, Sap Labs Biocon, Infosys, ICICI Bank, CISCO, Thomson Reuters India Limited and a few others, have claimed fraudulent tax refunds by filing revised ITR. The IT Department has warned salaried employees that if they inflate tax deductions/exemptions or resort to fraudulent tax claims, they could be prosecuted or their employer’s informed and strict action taken against them.

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Why Fake Income Tax Returns Can Get You In Trouble?

1. You do not report interest income

It’s a common trend not to report interest income earned from savings bank accounts and FDs while filing ITRs. Non-reporting and under reporting of interest income is tax evasion. Interest income earned can be detected from your bank account statements and Form 26AS. TDS is deducted on interest income and a mis-match of income by non-reporting can be easily identified.

SEE ALSO: How Salaried People Save Tax?

2. You submit fake bills for HRA

Many salaried employees submit fake rent receipts to claim HRA (House Rent Allowance). This is done without adequate supporting documents like lease agreement and so on. It’s easy for the tax department to detect these fake claims, if there is no adequate amount flowing out of your bank account, to the extent of the rent payments claimed.

SEE ALSO: Income Tax Rules For FY 2018-19

3. You claim false Section 80C deductions

Many employees resort to showing false life insurance and health insurance premium receipts, just to claim Section 80C deductions. These fraudulent claims can be easily detected by the tax department through Form 26AS available with the tax department. You could be prosecuted if you indulge in such activities.

4. You don’t include income got from all employers

It’s very common to change jobs in a financial year. If you have changed jobs in a year, you must include income got from all employers, while filing ITR. Your employer deducts TDS and the tax department already has all information on the income you have earned. So why risk a penalty?

5. You claim false deductions under Chapter V1-A

Unscrupulous tax advisors lure gullible salaried people, promising them high tax refunds. These tax advisors then take 10-25% of these refunds. These tax advisors inflate or make wrong claims under Chapter V1-A. For those who don’t know, Section 80C, Section 80D, Section 80E, Section 80G, Section 80DD, Section 80DDB, Section 80GGC and so on, come under Chapter V1-A.

Tax planners and tax advisors indulging in such practices will be severely punished.

6. You make false claims under Section 10

Many salaried employees make false claims under Section 10 (HRA, LTA, Medical reimbursement and so on) while filing ITR. The Income Tax Department has started comparing the data in ITR with Form 16, Form 16A, Form 26AS and so on. The ITR-1 utility for FY 2017-18 has been amended.

Salaried employees have to report taxable salary, allowances, perquisites and so on, separately. They also have to give the detailed break-up of exempt allowances provided in the exempt income Section. If the Income tax department finds discrepancies in the ITR you have filed vs Form 26AS/Form 16, you are in trouble.

7. You inflate home loan interest

Do you inflate home loan interest to claim additional deductions under Section 80C and Section 24?  You need to submit proof online and if the amounts do not tally, you are penalized.

8. You make false claims vis-a-vis capital gains

You try to save tax on capital gains by making false claims under Section 54, Section 54F, Section 54EC and so on. This is now difficult. The new ITR Forms require you to submit investment details which you have made under these Sections.

You are required to link Aadhaar with PAN for property transactions and the tax department will electronically verify the claims. You will easily be caught. Be Wise, Get Rich.

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