200% penalty and 7 years imprisonment for small mistake in ITR: AI is identifying

The income tax filing season is going on. From salaried to businessmen, everyone is filing ITR. In such a situation, if you also make fake claims of tax deduction to the Income Tax Department, then you may have to pay a heavy fine. Actually, the Income Tax Department is using AI and data analytics to investigate fake claims of tax deduction.

This change by the Income Tax Department is part of a comprehensive strategy aimed at eliminating fraudulent practices. Especially those fraudulent practices that are operated by agents claiming ‘guaranteed refund’.

The officials have unearthed widespread misuse of popular deduction sections including house rent allowance (HRA) under section 10 (13A), donations under section 80G and loan interest under various sections of section 80.

TaxBuddy said, ‘There has been a large scale misuse of deduction sections like HRA under section 10 (13A), donations under section 80G and medical or educational loan interest under various sections of 80. The department’s AI is now verifying these claims with TDS data, bank records and other third sources.

Heavy penalty may be imposed

If you also make fake claims and are caught by the Income Tax Department’s AI system, then the Income Tax Act provides for strict penalties for giving wrong information about deductions. This can include a penalty of up to 200% of the tax liability and interest rates of up to 24% per annum. Serious violators can be prosecuted, which can also include imprisonment of up to seven years under Section 276C for deliberate tax evasion.

AI system is identifying immediately

According to TaxBuddy, the Income Tax AI system is also exposing many taxpayers. The department’s AI-powered system immediately detects discrepancies between the income tax returns and the income data received from AIS and Form 26AS. It is also identifying and reporting these mistakes.

Even a small mistake can cost you heavily

TaxBuddy said that even a small error in this data can send a notice. He further said that now just filling the form is not enough. You must have solid documents in support of every claim. Taxpayers are cautioned against trusting dubious refund agents and are encouraged to keep detailed records to verify their claims.

What to do?

According to TaxBuddy, ITR-U should be filed immediately to correct any mistakes and avoid potential penalties. Filing ITR-U now can help you avoid harsh penalties and litigation later.