Income Tax Department Warns Salaried Class Against Filing Wrong ITRs

An “advisory” dated April 16 by the Income Tax (I-T) Department's Centralized Processing Center in Bengaluru notes "with concern" the attempt salaried taxpayers make to "under-report income or inflate deductions aided and abetted by unscrupulous intermediaries". Those who attempt to commit fraud on the ill-advice of their financial planners are liable to be punished under the various penal codes and prosecution provisions of the I-T Act, the one-page advisory warns.

“If the department notices any fraudulent claims in the returns, such tax payers may be punishable under various provisions of the I-T Act. This may also delay issuance of refunds in such cases,” it says.

While directing all intermediaries to strictly confine their advice to taxpayers within the four corners of the I-T Act, the advisory has warned them of prosecution in case of “mis-advising” the taxpayers.

From the text, one message that is simply hard to miss is this---

Misreporting of income by the salaried taxpayer is not a willful move. India’s salaried class is largely ignorant about the income tax rules; the intermediaries are making the most of their ignorance.

In fact, one in every four salaried professionals in India is not aware of the tax savings potential offered by some tax benefits that form part of their salary breakup, says a survey by Nielsen India. Among the employees that opt out of reimbursements, 56 per cent of them do so for higher in-hand salary, thereby not using the full potential of the tax benefits offered to them, says the survey.

Keeping that in mind, let us make sure that your income is not misreported in any manner.

First of all, if you are earning money from more than one employee, do not forget to mention your other income source in your income tax return (ITR) form.

Renters: Salaried people get house rent allowance (HRA) as a component of their total salary, and can claim a deduction under Section 80GG of the I-T Act. Since misreporting the HRA is one the most common ways to escape paying higher taxes, additional care would be taken by the department to nab such offenders.

In case you inflate your monthly rent to claim higher house rent allowance and are not able to prove the same, you may land in trouble.

In case you are paying rent to your family members and you have no receipts to physically prove your claim, monthly deductions from your bank account that reflect the same could come to your rescue.

Home loan borrowers: Deductions can be claimed under Section 80EE of the I-T Act on home loan interest rate the borrower pays. The deduction allowed under the Section is Rs 50,000 a financial year. There have been several cases of misreporting this amount, too. In case you fail to submit an online proof of the same, action will be initiated against you.