The Income Tax Department has launched a crackdown on fraudulent Income Tax Return (ITR) refunds, focusing on bogus deductions and exemptions claimed by taxpayers. This move aims to curb the practice of claiming false refunds, which has resulted in significant revenue losses for the government.
As part of this initiative, the tax authority will scrutinize ITRs that claim unusually high deductions or exemptions, particularly those that seem inconsistent with the taxpayer’s income or financial profile. The department will also verify the authenticity of documents submitted to support these claims, such as fake invoices, receipts, or investment proofs.
Some common types of bogus deductions and exemptions under the scanner include:
- Fake charitable donations: Taxpayers claiming donations to non-existent or fake charities to reduce their taxable income.
- Bogus medical expenses: Claiming medical expenses that were never incurred or exaggerating actual expenses to claim higher deductions.
- False home loan interest: Claiming interest on home loans that do not exist or overstating actual interest paid.
- Fake investments: Claiming investments in non-existent or fake schemes, such as mutual funds or securities, to claim deductions under Section 80C.
- Exaggerated business expenses: Claiming business expenses that are not genuine or overstating actual expenses to reduce taxable income.
To detect and prevent such fraudulent activities, the Income Tax Department will use advanced data analytics and artificial intelligence tools to identify suspicious patterns and anomalies in ITRs. The department will also conduct audits and investigations to verify the accuracy of claims made by taxpayers.
Taxpayers found guilty of claiming bogus deductions or exemptions will face penalties, including:
- Imposition of penalties: Up to 200% of the disputed amount.
- Interest on disputed amount: Taxpayers will be required to pay interest on the disputed amount.
- Prosecution: In severe cases, taxpayers may face prosecution under the Income-tax Act, 1961.
It is essential for taxpayers to ensure that their ITRs are accurate and genuine, as the consequences of claiming bogus deductions or exemptions can be severe. If you are unsure about any aspect of your ITR, it is recommended that you consult a tax professional or seek guidance from the Income Tax Department.