Soon taxpayers will be under even more scrutiny. On 16 April 2018, the income tax department warned taxpayers that if they under-report incomes or inflate deductions while filing their income tax returns (ITR), they will be in trouble, with a capital T.
The department especially advised salaried taxpayers to stay away from intermediaries, who suggest illegal ways to bring down tax liability. Often, intermediaries help reduce the tax burden by helping taxpayers arrange fake rent agreements and slips, medical bills, donation receipts and so on. The tax department warned that if a taxpayer is found using such illegal means to reduce the taxes, the department can take strict action, including a penalty and even a jail term.
The advisory comes at a time when tax filing for the last financial year i.e. 2017-18 has already started. The ITR-1 form, which is meant for salaried individuals to file returns, has been made available for e-filing on the department’s websites (GIVE LINKS). Other ITR forms for e-filing are expected to be available shortly.
All taxpayers (except those who are 80 years old and above), with an income of more than ₹ 5 lakh or who have a refund to claim, need to file their returns electronically. Once the returns are filed, they get processed at Central Processing Centre (CPC) of the department, which operates as a back office of the income tax department with no human interface with the taxpayer.
All the returns are analysed by the department based on the details submitted by taxpayers in their ITRs.
The CPC mentioned in the advisory that, “if the department notices any fraudulent claims in the returns, such tax payers may be punishable under various provisions of the income tax Act. This may also delay issuance of refunds in such cases."
How bad does it get for you?
There are various penalties that can be slapped on taxpayers in case of tax evasion, besides the provision of being sent to jail.
According to income tax rules, penalties can range from Rs100 to a maximum of 300% of the tax evaded, in addition to the tax payable. Provision of jail term—between 3 months and 7 years—is also possible when a criminal offence is established. Read more about tax-related penalties here.
CPC also stated in the advisory that in cases in which the wrong claim is made by a government or public sector unit (PSU) employee, it will get reported to the vigilance division concerned or the employer for action under rules of conduct.
Action against agents: It won’t be only taxpayers who will be taken to task if found guilty of mis-reporting and tax evasion, intermediaries who advise or help in carrying out such actions may also face prosecution under the relevant section of the Income-tax Act, 1961, or any other Act as applicable.
So be careful when you file your income tax returns this time. It is advisable to take the help of a chartered accountant or a tax return preparer (TRP) appointed by the tax department to assist small and marginal taxpayers in preparing and filing their returns.