Five Common Income Tax Evasion Practices in India..!

March 31 marks the end of the income tax-saving season & the beginning of the income tax-filing season.

Everyone will soon get busy collecting proofs of investments, savings (like ELSS, PPF ets ) and expenses (like medical insurance premium, medical bills, LTA receipts etc) and try to minimise their tax outgo.

Income tax-saving & Tax Evasion

However, in the hurry to get maximum deductions, do not cross the thin line between income tax-saving & tax evasion.

The repercussions can be both monetary as well as legal.

Here is a list of five (5) common tax-evasion practices.

Are you committing any of these mistakes?

1. Submitting Fake Receipts..!

Employees often submit false house rent receipts for claiming HRA (House rent Allowance) exemption.

After it became mandatory to declare the PAN (Permanent Account Number) number of your landlord, fake receipts have come down to some extent.

 However, you still need not declare PAN if the rent is less than Rs. 1 lac per year.

If you submit a false rent receipt under this section, you can get a tax notice under Section 271(1)(c) for furnishing of inaccurate particulars of income for which the minimum penalty is 100% of tax sought to be evaded & maximum 300%.

Mr. Sudhir Kaushik, CFO and co-founder, Taxspanner said, "False medical bills & claiming LTA without actual travelling are also common.There have been cases where random investigation has happened & employees have been fired,"

Many also claim tax benefits under Section 80C by submitting fake insurance premium receipts.

2. Claiming Both HRA & Home Loan Benefits..!

The salaried who have an HRA component and are also servicing a housing loan often claim deductions for both - income tax benefit under Sec 80C and Sec 24 for repayment of home loan & HRA benefits under Sec 10(13A) for rent paid.

This is allowed under exceptional situations - when you, for some reason, are unable to stay at the property you own.

Mr. Anil Rego, CEO, Right Horizons, a wealth management firm said, "Dual claim is allowed when a person is staying in another city on rent while the property bought is in a different location"

 If the two houses are in the same city , it will be difficult to convince the Income Tax department.

3. Trying To Transfer Tax Burden..!

Income taxpayers commonly transfer investments and savings in the name of their spouse (Husband or wife) or / children and invest in instruments generating taxable income to take advantage of the income tax slabs.

However, any income generated out of funds transferred to spouse or /  minor child is clubbed in the hands of the transferor & taxable.

Showing rental income from joint property under only the non-working spouse's name is also tax evasion.

Mr. Arvind A Rao, a CA & CFP (chartered accountant and  Certified financial planner) said, "Proportionate income, as per the ownership percentage, should be added to the each of their incomes & tax will be levied on the same. If they flout this rule, interest for the period will be recovered and there is scope for penalty to be levied under section 271(1)(c)"

4. Not Reporting Loan Re-payments..!

Accepting cash or / re-payment of loans from friends & family in cash for amounts higher than Rs. 50,000 and not reporting it in tax filing is also income tax evasion.

5. Not Disclosing Interest Income..!

Interest earned up to Rs. 10,000 from bank savings is exempt from income tax. However, avoiding TDS (Tax deduct at source) by mis - using Forms 15G and 15H is an offence.

Some try to split the amount in 2 or 3 accounts to mis-guide. However, that does not help as your PAN will still be the same.

Src: Chandralekha Mukerji, ET Bureau 

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