India’s Income Tax Department Cracks Down on Fake Deductions: 200% Penalty and Prosecution Await!
Thank you for reading this post, don't forget to subscribe!The Indian Income Tax Department is no longer playing around when it comes to fraudulent tax deductions. A recent investigation uncovered over 90,000 salaried individuals who falsely claimed deductions, costing the national treasury a staggering ₹1,070 crore. Now, the department has significantly tightened its screws, making it much harder to get away with bogus claims.
New ITR Rules Demand Granular Proof
The updated Income Tax Return (ITR) utilities (ITR-1 and ITR-4) are the cornerstone of this crackdown. Gone are the days of vague, lump-sum declarations. Taxpayers must now provide detailed documentation for every deduction claimed:
- Section 80C (Investments): If you’re claiming deductions for LIC, PPF, or ELSS, you’ll need to provide policy numbers or document IDs.
- Section 80D (Health Insurance): For health insurance benefits, the insurer’s name and policy number are now mandatory.
- Loan Deductions (Sections 80E, 80EE, 80EEA): Education and home loan benefits require comprehensive disclosures, including lender names, loan account numbers, and sanction dates.
- Section 80EEB (Electric Vehicle Deductions): Even your electric vehicle’s registration number will be needed for this deduction.
AIS to the Rescue: Automated Verification in Full Swing
The Income Tax Department is leveraging the Annual Information Statement (AIS) to its full potential. This powerful tool allows them to cross-verify your claimed deductions against your actual financial records, automating the detection of discrepancies and ensuring compliance.
Stiff Penalties for Non-Compliance
The message is crystal clear: document every deduction, or face severe consequences. Failure to comply with the new rules can result in:
- Penalties of up to 200% of the tax due.
- An annual interest of 24%.
- Prosecution under Section 276C, which deals with willful attempts to evade tax and can lead to rigorous imprisonment and hefty fines.
This compliance-first overhaul marks a significant shift in India’s tax landscape. For taxpayers, adapting to this documentation-heavy process is no longer optional – it’s essential to avoid crippling penalties and legal action.
