Income-Tax department recovers Rs 1,070 crore from wrongful claims
Jan 16, 2025
The taxpayers filed updated income tax returns (ITRs) for assessment years from FY23 to FY25 after doing the corrections
In a crackdown on incorrect tax deduction, the Income-Tax Department has got back Rs 1,070 crore, which it had paid as refund, from nearly 90,000 taxpayers, according to sources in the Central Board of Direct Taxes (CBDT).
The taxpayers filed updated income tax returns (ITRs) for assessment years from FY23 to FY25 after doing the corrections.
The department said these deductions were claimed under Sections such as 80C, 80D, 80E, 80G, and 80GGC, leading to a reduction in taxes payable.
Section 80C allows deduction on investment up to Rs 1.5 lakh per year. Section 80D is concerned with medical insurance premium and medical expenses. Section 80E has the provision for interest on educational loans. And Sections 80G and 80GGC allow deduction for donations to charitable organisations and political parties, respectively.
Government sources said investigations of “email clusters” showed many such taxpayers were employees of public-sector undertakings, multinational corporations, and private limited companies.
Further verification uncovered unscrupulous elements had misguided taxpayers into making these claims.
“These employees are of several public-sector units like Neyveli Lignite Corporation, Bharat Heavy Electricals, and Oil and Natural Gas Corporation, and multinational companies like Oracle, Amazon, and Accenture. But these companies are not involved. It’s just their employees who have been claiming deduction without the knowledge of their employers,” the government source said.
To address the matter, the department has been conducting outreach programmes with employers to raise awareness about the consequences of claiming incorrect deductions and the steps taxpayers can take to rectify such errors.
Under Section 139(8A) of the Income Tax Act, 1961, taxpayers are allowed to file updated returns and correct errors of omission or commission within two years of the end of the relevant assessment year.
Government officials emphasised the importance of voluntary compliance and advised taxpayers to utilise the updated return mechanism to avoid punitive action.
“Taxpayers can file updated returns to withdraw any incorrect claims of deduction and ensure compliance,” a source said. To facilitate this, the department has made resources available online to guide taxpayers on filing updated returns under the ITR-U mechanism.
According to chartered accountant Chetan Daga, managing partner at AdvantEdge Consulting, those who have claimed incorrect deduction, either deliberately or through improper advice, have the option of giving up their claims by filing a revised tax return or an updated tax return.
“A revised return can be filed by December 31 of the assessment year. This time is short. Once the time limit is over, the option that remains is to file an updated return within three years of the end of the relevant year. Giving up claims requires the taxpayer to pay the differential tax with interest. However, giving up claims in the updated return attracts differential tax, interest and an additional fee. The additional fee is 25 per cent or 50 per cent of the differential tax and interest, depending on when the updated tax return is being filed,” said Daga.
[The Business Standard]
