ITR Filing: Income tax department targets taxpayers claiming false deductions; sends notices to offenders

The Income Tax Department has once again turned its attention to taxpayers who have made false deductions in their Income Tax Returns (ITR) to claim exemptions. Following last year's crackdown in Telangana and Andhra Pradesh, where several employees were identified for reducing or eliminating their tax liability through incorrect deductions, the department is continuing its efforts this year. Notices are being selectively sent to those suspected of submitting inaccurate information.

Recent Developments in Major Cities

In recent weeks, companies based in Bengaluru, Mumbai, and Hyderabad have received communication from the Income Tax Department. The department has flagged instances where employees may have claimed excessive deductions on their Form-16. While claiming additional deductions does not automatically indicate fraud, it has raised suspicions, prompting further scrutiny.

In cases where discrepancies are found, the department can issue a notice requesting proof of deductions or details about the income source. Failure to provide satisfactory responses could result in additional tax liabilities, penalties, and interest charges for late tax payments. Continued non-compliance might even lead to legal action.

Employer Responsibility and Employee Caution

Employers have a crucial role in this process. Under Section 192 (2D) of the Income Tax Act, they are required to submit all tax-related proof provided by employees to the Income Tax Department. This allows the department to verify where investments have been made.

Employees should be cautious when claiming deductions. If the deductions claimed exceed what is recorded on Form-16, it could trigger a notice from the department. It's essential to ensure that all claims are accurate and properly documented to avoid potential issues.