ITR Filling Deadline: Don’t do this mistake otherwise need to pay 200% penalty

ITR filing Deadline: As the deadline for filing Income Tax Returns (ITRs) approaches on July 31, 2023, the Income Tax Department is intensifying its efforts to tackle taxpayers who may be using fake rent receipts to evade taxes. ITR Filling Deadline: Don’t do this mistake otherwise need to pay 200% penalty.

The income tax department has been cracking down on salaried individuals for submitting false or incorrect income tax returns (ITRs). From submitting fake rent receipts to false donations, the tax department is proactively flagging such returns. Salaried individuals have been allowed to claim tax exemptions for rent up to Rs1 lakh without disclosing the PAN of their landlords (as per Section 10(13A)).

If the Income Tax Department detects discrepancies in deductions claimed for house rent, erring taxpayers could be fined up to 200 per cent of the total tax liability. To avoid any run-ins with the tax department, it’s recommended that taxpayers ensure honest compliance with the tax laws.

Practical measures to achieve this include using a valid rental agreement, preferring online or cheque payments for rent, mentioning the landlord’s PAN for payments exceeding Rs 1 lakh, maintaining records of utility bill payments, and obtaining a PAN declaration from the landlord if it is not readily available

Upon detecting any inconsistencies, the Income Tax Department can issue a notice asking for valid documents, kick off an inquiry, or revoke the House Rent Allowance (HRA) exemption. The assessing officer can request proof of claimed tax deductions. If the taxpayer fails to furnish the required documents, the claimed exemption could be declined.

Such individuals may then face action in the form of additional taxes, interest, and penalties. To curb such practices, the Income Tax Department may impose a penalty of up to 200 per cent on the misreported income if discrepancies are found. This is in line with Section 270A of the Income Tax Act, 1961, where underreported income may attract a 50 per cent penalty, while misreported income incurs a 200 per cent penalty.

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