In an income tax investigation it has been found out that more than 90,000 salaried individuals have falsely claimed tax deductions, costing India’s tax exchequer over Rs 1,070 crore.
Additionally, the Income tax Department has also tightened its filing process, making fake tax deductions relatively more difficult to carry out.
Stricter Regulations Make False Deductions Impossible
The recently updated Income Tax Return (ITR) utilities, which include ITR-1 and ITR-4, now require granular proof for deductions across key sections of the Income Tax Act.
Under the Section 80C, there are certain claims which cover investments such as LIC, PPF, and ELSS, which must now include policy numbers or document IDs.
Under Section 80D, for health insurance, taxpayers now need to provide the insurer’s name and policy number.
This officially puts an end to lump-sum declarations.
The strict regulations crackdown has further been extended to deductions on loans. Under Sections 80E, 80EE, and 80EEA have home loan benefits, but they also now require detailed disclosures, including the name of the lender, loan account numbers, and sanction dates. Further, for electric vehicle deductions under Section 80EEB, the registration number of the vehicle must also be disclosed.
What Is The Objective Behind These Strict Regulations?
These reforms will leverage the Annual Information Statement (AIS), enabling the department to cross-check claims against actual financial records.
The objective behind this is to weed out fake claims, enforce accountability, and boost compliance through automated verification.
What Happens If You Fail To Comply?
The failure to comply with the regulations can result in penalties up to 200% of the tax due, 24% annual interest and prosecution under Section 276C.
Source from: https://www.republicworld.com/business/beware-new-itr-norms-impose-200-penalty-for-fake-tax-claims-itr-2025
