Income Tax Department: Using AI I-T Department Targets Tax Fraud by Salaried Employees

The IT department has identified various methods used to evade tax, including submitting fake rent receipts in the name of relatives, false donations, exaggerated claims against loans, and more.

According to a recent report, the Income Tax (I-T) department has been taking strict actions against salaried individuals who submit false or incorrect income tax returns (ITRs). The department has identified various unethical practices, such as submitting fake rent receipts, false donations, exaggerated claims on loans, and more, in an attempt to evade taxes.

As reported by Economic Times on Saturday, the Income Tax department is now using new AI software to effectively catch false claims and lies in the tax filing process. This has made it more challenging for individuals to dodge the IT department compared to earlier times.

According to unspecified sources, the Income Tax department has issued notices to numerous salaried professionals, asking for clarification and evidence regarding certain claims. These notices pertain to exemptions related to house rent allowance under section 10 (13A), deductions for interest on home loans under section 24 (b) of the I-T Act, and allowances for hiring helpers to perform official duties under section 10 (14).

Individuals falling within the salary bracket of over Rs 50 lakh can undergo reassessment within a decade, while those with a bracket of less than Rs 50 lakh may be reassessed for up to eight years. 

According to Siddharth Banwat, a partner at a large CA firm, the use of technology in tracking tax evasion is essential, as many individuals in lower tax brackets assume their cases won't be scrutinized and may make false deduction claims. 

Furthermore, the Tax department has requested taxpayers to provide complete details of the chartered accountant, lawyer, or I-T professional responsible for preparing and filing their tax returns. Whose donation-to-income ratio seems unusual for FY19. 

This is being done to ensure the accuracy and legitimacy of donation claims. Computerized records allow the revenue department to compare tax returns filed by charities or political parties with the returns of individuals and verify the authenticity of donation claims.

Also Read: HRA Deduction: Section 10(13A) Allows HRA Deduction for Rent Paid to Wife

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