ITR Filing - Do Not claim fake deductions

Income Tax Notice Sample for fake deductions

Following is the sample of Income Tax notice received under section 133(6) by an individual who claimed many fake deductions on poor advise of an unqualified tax consultant. It can be clearly seen that this person had claimed & received refund from the department after claiming various exemptions under section 10, section 24b, deductions under chapter VIA such as 80C, 80D, 80DD, 80DDB, 80GGC, 80U, etc.

Tax Planning

Tax planning refers to the process of arranging your financial affairs in a manner that optimizes your tax liability within the legal framework. It involves analyzing your income, expenses, investments, and other financial activities to minimize the amount of tax you are required to pay. The goal of tax planning is to utilize available deductions, exemptions, credits, and other tax-saving strategies to legally reduce your tax burden and maximize your after-tax income. Effective tax planning requires careful consideration of various factors, such as the timing of income and expenses, investment choices, retirement planning, and utilization of applicable tax incentives and provisions. It is important to note that tax planning should be conducted within the boundaries of tax laws and regulations, avoiding illegal tax evasion practices. 

Tax Evasion

Tax evasion refers to the illegal act of deliberately evading or avoiding the payment of taxes that are owed to the government. It involves intentionally misrepresenting or concealing income, assets, transactions, or other financial information in order to reduce tax liability or avoid paying taxes altogether. Tax evasion typically involves activities such as underreporting income, inflating deductions (which was done in the case mentioned above), maintaining undisclosed offshore accounts, engaging in fraudulent schemes, or intentionally disregarding tax obligations.

Tax evasion is considered a criminal offense and is subject to penalties, fines, and even imprisonment. Income Tax Department employ various measures, including audits, investigations, and penalties, to detect and prosecute instances of tax evasion. It is important to note that tax evasion is illegal and should not be confused with legitimate tax planning, which focuses on legal methods to minimize tax liability within the boundaries of tax laws.

Common Tax Deductions

In India, salaried individuals are eligible for various tax deductions under the Income Tax Act. Some common tax deductions available to salaried people in India include:

1. House Rent Allowance (HRA): If you receive HRA as part of your salary and live in a rented accommodation, you can claim deductions based on the actual HRA received or the amount spent on rent, whichever is lower. The deduction is calculated based on specific criteria outlined by the Income Tax Department.

2. Leave Travel Allowance (LTA): LTA is a component of the salary package that allows individuals to claim tax benefits for travel expenses incurred on domestic vacations. The deduction is limited to the cost of travel for the employee and their immediate family members.

3. Medical Allowance: Salaried individuals can claim deductions for medical expenses incurred for themselves and their family members. The maximum deduction allowed is up to Rs. 15,000 per year.

4. Employee Provident Fund (EPF): Contributions made to the EPF by both the employee and employer are eligible for tax deductions under Section 80C of the Income Tax Act, subject to certain conditions.

5. National Pension Scheme (NPS): Contributions to the NPS are eligible for deductions under Section 80CCD(1B) of the Income Tax Act, up to Rs. 50,000 in addition to the deduction available under Section 80C.

6. Life Insurance Premium: Premiums paid towards life insurance policies for self, spouse, and children are eligible for tax deductions under Section 80C of the Income Tax Act, subject to certain limits.

7. Home Loan Interest: Interest paid on home loans is eligible for tax deductions under Section 24(b) of the Income Tax Act. The maximum deduction allowed is Rs. 2 lakh for self-occupied properties.

These are just a few examples of common tax deductions available to salaried individuals in India. It is advisable to consult with a tax professional or refer to the official guidelines of the Income Tax Department for accurate and up-to-date information regarding tax deductions.

To all individuals, it is advised not to make fraudulent claims for minor refunds, as it could lead to significant penalties and interest charges in the future. 

DISCLAIMER

The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is India's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA. Please note the all consultations with the CA are Paid consultations. Financial Year 2023.