Scrutiny by IT Dept. for False Salaried Deductions


In the current tax landscape, salaried individuals are being advised to exercise extreme caution as they prepare to file their Income Tax Returns (ITRs). This year, the Income Tax Department has ramped up its scrutiny and vigilance, actively seeking documentary evidence to counter instances of bogus deductions and exemptions claimed by certain taxpayers. In the past, individuals have resorted to dishonest practices such as submitting fake rent receipts, falsifying home loan details, and making bogus donation claims to obtain additional tax refunds. However, these deceitful tactics have not escaped the keen eye of tax authorities, who have responded with more stringent measures to combat tax evasion. The government is now taking decisive actions against those attempting to deceive the tax system, issuing notices to taxpayers to demand the provision of proper documentation to substantiate their claims for exemptions under specific sections of the Income Tax Act.

Increased Scrutiny:
One of the key aspects of the Income Tax Department’s enhanced approach is the incorporation of advanced software that effectively identifies potentially fraudulent taxpayer returns. By leveraging this technology, the department promptly red-flags any suspicious claims for further investigation. As a result, taxpayers are now receiving notices requesting them to provide authentic and verifiable proof for the deductions and exemptions they have declared in their ITRs. This targeted scrutiny aims to ensure the integrity of the tax filing process and safeguard the revenue collection system from deceptive practices.

Targeted Exemptions and Deductions:
The focus of the notices issued by the Income Tax Department primarily centers around exemptions related to House Rent Allowance (HRA) as per section 10(13A) for salaried individuals, allowances under section 10(14) for hiring a helper for official duties, and deductions under section 24(b) of the Income Tax Act for interest paid on home loans. In the past, taxpayers could avail of these benefits without the need to submit supporting documents, but the leniency has now been replaced with a more rigorous approach. The intention is to ensure that only legitimate claims are entertained, discouraging any attempts to exploit these provisions dishonestly.

Empowered by Section 133(6):
To further augment its investigative capabilities, the Income Tax Department is utilizing section 133(6) of the Income Tax Act. This particular provision empowers tax assessing officers to seek information on specific transactions carried out during a particular financial year. This authority enables them to meticulously scrutinize claims and identify any potential discrepancies, ensuring that taxpayers are held accountable for the accuracy and authenticity of the information provided in their ITRs.

Government’s Unwavering Efforts to Curb False Refunds:
Over the years, the government has escalated its vigilance and enforcement efforts to tackle individuals attempting to claim false refunds. A recent instance from Jammu and Kashmir serves as a poignant example, where the tax department detected more than 28,000 government employees who had claimed excessive and ineligible deductions. The discovery was made through the department’s TDS wing based in Srinagar, leading to the filing of FIRs against 404 individuals, including one chartered accountant. This proactive response demonstrates the government’s unwavering commitment to preserving the integrity of the tax system and ensuring that those attempting to defraud it face appropriate legal consequences.

With the impending deadline of July 31 for filing Income Tax Returns, salaried individuals are strongly urged to exercise prudence and honesty while claiming deductions and exemptions. The Income Tax Department’s heightened scrutiny and demand for documentary evidence are integral components of the government’s ongoing efforts to combat tax evasion and foster a fair and transparent tax system. By adhering to the rules and regulations and refraining from any fraudulent practices, taxpayers can not only avoid legal repercussions but also actively contribute to the nation’s progress and prosperity.

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