Beware of Fake Claims and Tax Notices: Understanding the Consequences: The income tax department has reportedly been sending notices to salaried individuals asking for proof of the tax exemptions and deductions claimed while filing income tax returns (ITRs).
The income tax laws allow individuals to claim various tax exemptions and deductions, provided they have opted for the old tax regime. For instance, an individual can claim tax exemption on house rent allowance (HRA), leave travel allowance (LTA), deduction on interest paid on housing loans, etc.
However, many individuals use fake rent receipts or travel bills to claim such tax exemptions and save income tax. This could lead to notices from the I-T department.
The income tax notices being sent now are for the ITRs filed for last year – for assessment year 2022-23 (FY 2021-22). If you are filing your ITR now and claiming certain deductions and tax exemptions, here are some things you should keep in mind to avoid getting tax notice this year.
A business consulting firm, says, “While claiming exemptions and deductions, individuals should ensure that such deductions or exemptions claimed by them are in accordance with the receipts, invoices or other necessary documents maintained by them that reflect the payment.
It is pertinent to note that rent paid to family members may come under the scrutiny of the income tax department and may be subject to potential litigation. sent if the taxable incomes were lower than those in the previous years.
The Income-tax Act does not prohibit an employee from claiming HRA exemption for the rent paid to the family members. The exemption can be allowed if the claim is genuine, which should be supported by documentary evidence, like monthly payment of rent, utility bills, and the recipient offers such income in his/her ITR. To claim deductions under Sections 24(b) and 80C for home loan EMI payments, ensure you obtain an interest and principal repayment certificate from the bank.”
What will happen if fake claims are detected?
Certain individuals may have made fake claims while filing the ITR. It lowers their taxable income. This will lead to misreporting of income.
Misreporting income, such as claiming deductions for donations with kickback payments or deductions reserved for persons with certain disabilities, may lead to penalties up to 200% of the evaded tax.