Income Tax Alert! Misreporting of Income may Lead to Penalties: Know how to Avoid

The Income Tax Department has advised taxpayers to rectify any inaccurate refund claims or exemptions by submitting revised returns for the current assessment year and updated filings for the previous assessment years. The deadline for filing Income Tax Returns (ITR) for the assessment year (AY) 2023-24 was July 31, 2023. If you fail to file your returns by that date, you have the option to submit a belated return until December 31, 2023. The Official ‘X’ handle of the Income Tax Portal tweeted: –

https://x.com/IncomeTaxIndia/status/1731912849981591709?s=20 The Income Tax Department has emphasized the importance of accurate reporting of various deductions and exemptions to all stakeholders. These include deductions for house rent paid, interest on education loans, principal and interest on home loans, health insurance premiums for self and family, deductions for disabled individuals, and contributions to political parties, charitable institutions, and trusts. Genuinity of Claims and Proper Reporting of Income When claiming deductions or exemptions in your Income Tax Return (ITR), it is vital to ensure that all claims are genuine, supported by authentic payments and documentation. The post underscores that misreporting of income should be avoided.

In case an assessee falsely claims deductions under the Income Tax Act, it constitutes a form of tax evasion, leading to potential penalties imposed by tax authorities. With the Annual Information System (AIS) and Transaction Information System (TIS), tax authorities possess comprehensive data about taxpayers, enabling them to scrutinize deductions and exemptions closely. Misreporting of income includes misrepresentation or suppression of facts, failure to record investments in books of account, unsubstantiated claims of expenditure, false entries in books of account, failure to record relevant receipts, and failure to report international transactions. Penal Provisions under Income Tax Act Penalties under the Income Tax Act can be imposed under Section 270A for under-reporting and misreporting of income.

The penalty may amount to 50% of the tax payable on under-reported income, or 200% if misreporting is involved. Section 271(1)(c) addresses penalties for concealment of income or furnishing inaccurate particulars. Deliberate provision of inaccurate information regarding deductions may lead to a penalty ranging from 100% to 300% of the tax sought to be evaded. Failure to pay self-assessment tax under Section 140A(3) may result in penalties determined by the Assessing Officer. Offenses like willful attempt to evade tax or failure to furnish returns under Section 276C(1) may result in imprisonment and fines. Revised Returns For rectification of mistakes in returns, taxpayers can file revised returns under Section 139(5) of the Income Tax Act.

The provision allows for corrections in case of errors or omissions. If the initial ITR is unverified, taxpayers can use the ‘Discard’ option on the income tax portal. Belated Returns For belated returns, filed after the deadline under Section 139(4) of the Income Tax Act, penalties under Section 234F may apply. The penalty is Rs 5,000, but only Rs 1,000 for individuals with a total income below Rs 5 lakh. Additionally, interest under Section 234A, calculated at one percent per month, is levied on the unpaid tax amount for each month or part thereof in the case of belated filing.

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