Income Tax: Tax demand with 200% penalty, wrong deductions increase the difficulty..
If you earn ₹50 lakh or more annually, beware. The Income Tax Department is sending notices to such individuals en masse, citing discrepancies in deductions and exemptions.
TaxBuddy, a tax advisory platform, shared a case on X, where incorrect deductions of ₹10.65 lakh were claimed, resulting in an additional tax of ₹3.14 lakh and a penalty of 200%, or ₹6.29 lakh. A total of ₹9.44 lakh was paid.
The tax department is now using advanced technology and automated systems. Your ITR is now matched with Form 16, company information, bank, and other financial transactions. Minor errors that previously went undetected are now immediately detected. The government's focus is on expanding the tax base and ensuring accurate reporting. High-income earners are being closely monitored, as they are likely to generate greater revenue.
What should taxpayers do?
If you've claimed a significant deduction, check your return immediately. Compare Form 16, HRA receipts, and proof of investment from LTA, 80C, and 80D. Every claim must be supported by the correct documentation.
Revised Return or ITR-U?
The deadline for filing a revised return is limited. If that deadline has passed, an updated return, or ITR-U, is an option. Using ITR-U allows you to correct errors up to 48 months after the end of the assessment year. However, this incurs additional tax. The longer the delay, the greater the additional burden. Keep in mind, ITR-U cannot be used to reduce taxes or obtain a higher refund. It's only for correcting understated income or incorrect claims.
Finally,
In today's data-driven tax system, errors are unavoidable. It's better to check them yourself and make corrections promptly rather than waiting for a notice. Otherwise, a small mistake can cause a significant financial setback.
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