The Income Tax Department has clarified that taxpayers must declare all income sources when filing their ITR for the financial year 2024-25.
If you are preparing to file your Income Tax Return for the financial year 2024-25, be aware that the Income Tax Department is now taking serious action against any false information or fraudulent claims in ITRs. Showing incorrect deductions or concealing income can not only lead to penalties but also result in legal proceedings. Therefore, it is crucial to exercise utmost caution while filing your ITR.
What is the New Rule?
The Income Tax Department has clarified that if an individual intentionally provides false information, uses fabricated documents, or makes fraudulent claims regarding deductions, the tax liability can be up to twice the amount assessed. In addition, a penalty of 24% per annum interest and legal action under Section 276C of the Income Tax Act may also be initiated.
These Mistakes Can Lead to Significant Losses
There are common mistakes that people often make while filing their returns, which can lead to hefty penalties. Let’s look at some of these common errors:
Claiming Deduction under Section 80C Without Proof
Deductions under Section 80C, such as PPF, LIC premiums, and tuition fees, can be claimed. However, if you lack valid proof for these investments, the department may reject your claim. Unsubstantiated deductions will be considered fraudulent.
Making a Mistake in Changing Tax Regime
If you initially opt for the old tax regime and later switch to the new one, all the deductions taken under the old regime may be nullified. The department may consider this change as concealed information if it’s not properly disclosed.
Claiming HRA Without Rent Agreement and Landlord’s PAN
Individuals renting accommodation can claim HRA, but if you don’t have a rent agreement and the landlord’s PAN number, your claim may be rejected. Any false claims related to this will also be considered fraudulent.
Showing Personal Expenses as Business Expenses
If personal expenses like mobile bills, travel costs, and food expenses are misrepresented as business expenses, it constitutes tax evasion and can lead to penalties.
Hiding Freelance, Crypto, or Side Income
If you have earned additional income through freelancing, share trading, crypto, or any other means and haven’t declared it, this is a serious violation. The Income Tax Department now has access to all sources of income tracked through the AIS (Automated Information System).
To Avoid Penalties, Keep These Points in Mind
To prevent the Income Tax Department from imposing penalties and ensure your return is accepted without any issues, keep the following points in mind:
Always maintain authentic documentation for any deductions you claim.
- Match your income declared in the AIS (Annual Information Statement) with your income in the ITR.
- Declare all income sources, regardless of their size.
- File your ITR before the deadline to allow for amendments or corrections.
- Do not attempt to amend your return after filing, as it will not be accepted.
If the Income Tax Department discovers that you intentionally provided false information, subsequent attempts to file a revised return (Revised Return) will be unsuccessful. In such cases, the revised return will not be accepted, and legal action will be taken.
The Responsibility for Errors Lies with the Consultant or CA as Well
Many people believe that if a consultant or CA files their return, the responsibility for any errors lies with them. However, according to Income Tax law, the taxpayer is solely responsible for the return filed. Therefore, if the CA makes a mistake, the responsibility will still fall on the taxpayer.
These Rules Apply to All Taxpayers
These strict rules apply to all taxpayers, including salaried employees, freelancers, professionals, traders, small entrepreneurs, and all other categories. There is no scope for exemptions under Income Tax law.
Caution Regarding AIS Reports
The AIS (Annual Information Statement) is a report containing information on bank transactions, share market investments, mutual funds, credit card expenses, and all other financial activities. This report is available on the Income Tax portal. It’s essential to review it before filing your ITR to understand the financial information the government already has about you.
