Notice to Salaried taxpayers over massive fraud involving around 90,000 salaried taxpayers with collective wrongful tax deduction worth nearly ₹1,070 crore
The Income Tax Department has uncovered a massive fraud involving around 90,000 salaried taxpayers, who collectively made wrongful tax deduction claims worth nearly ₹1,070 crore as of December 31, 2024. This discovery has raised concerns about fraudulent practices among taxpayers.
It’s been found that employees misused tax deduction provisions by submitting forged documents, such as HRA rent receipts, LTA tickets, or donation certificates. Some employees also directly claimed deductions in their income tax returns to get tax refunds or reduce taxable income, bypassing the limited checks conducted by employers.
The IT Department used advanced detection methods, including:
– Cross-Referencing PAN Data: Verifying landlord details and reported income to detect false rent claims.HRA frauds are common one widespread misuse involves the house rent allowance (HRA) exemption. Many taxpayers claim this deduction without actually paying rent to a landlord. To detect such fraud, tenants paying rent over ₹1 lakh annually must disclose their landlord’s PAN. The IT Department cross-checks whether the landlord reports the rental income in their tax returns. If discrepancies arise, the Department may investigate.
– Tracking Charitable Donations: Analyzing donation reports (Form 10BD) to identify fake donations.Trusts are required to submit detailed donation reports (Form 10BD) to the IT Department, listing donor names, PANs, and amounts. Fake donations often come to light during audits or unusual spikes in contributions.
– Third-Party Data: Cross-verifying data from banks, employers, and other entities against taxpayer filings to spot inconsistencies. Data from banks, employers, and other entities are cross-verified against taxpayer filings to spot inconsistencies.
Taxpayers caught making false claims face severe consequences, including payment of due taxes with interest under Ss. 234B and 234C of the Act, fines/penalties ranging from 50% to 200% of the evaded tax under S. 270A and prosecution for willful evasion. Serious cases can lead to prosecution under S. 276C of the Act. However, taxpayers can rectify mistakes by filing a revised return or an updated return within 2 years of the relevant assessment year.
