Are Taxpayers Risking I-T Notices Over False 80C, HRA Deduction Claims?

False ITR Deduction Claims: Several taxpayers, including salaried individuals, have come under the lens over the years for claiming non-existent deductions, since they are not required to submit documents to back their income, losses or deduction claims when they file their returns.

In the backdrop of Income Tax Department's crackdown on fake deductions claims, several indiviauls hvae come  under the radar over claiming non-existent deductions as taxpayers are not required to submit documents as proofof their income, losses or deduction claims. 

The I-T department has already begun using the Annual Information Statement (AIS) and artificial intellegences (AI) tools to asses and track financial data with ain aim to identify such fraudulent claims. Now, many taxpayers have, over the years, received notices seeking proof or explanation of the discrepancies. As per rules, tax queries can be raised even after your return is processed and refund credited.

Documentary Proof Behind Claiming Deductions

The preffered choise is to be honest while claiming deductions and avail tax breaks only if one can back them up with documentary proof, should there later be a notice by the income tax department. For instance, taxpayers should ensure they can furnish rent receipts and agreements to back HRA claims, receipts for life and health insurance premiums, and confirm having made 80C investments, and so on.

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Looking over one's AIS before filing income tax returns is a must – if you are confident the AIS entries are erroneous, raise your concern and go ahead with completing the exercise. Likewise, keep track of Form-26AS, or tax credit statement, too. It contains details of property purchases, high-value financial investments, and TDS/TCS transactions executed during the year.

AIS, considered an extension of Form-26AS, is more comprehensive. It also provides details of savings account interest, dividend, rent received, purchase and sale transactions of securities/immovable properties, foreign remittances, interest on deposits and so on. Further, the AIS makes room for taxpayers to provide essential feedback on the transactions reported, if a case with discrepancies arises.