Salaried may get Income tax notices: If a person chooses the old tax regime, the income tax regulations permit them to claim a variety of tax exemptions and deductions. A person may request tax exemptions for things like home rent allowance (HRA), leave travel allowance (LTA), and the deduction of interest on housing loans, among other things.
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However, many individuals use fake rent receipts or travel bills to claim such tax exemptions and save income tax. This could lead to notices from the I-T department. In order to verify the tax exemptions and deductions claimed on income tax returns (ITRs), the income tax department seems to be sending notice to salaried people.
The income tax notices being sent now are for the ITRs filed for last year – for assessment year 2022-23 (FY 2021-22). If you are filing your ITR now and claiming certain deductions and tax exemptions, here are some things you should keep in mind to avoid getting tax notice this Financial year 2022-23.
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“While claiming exemptions and deductions, individuals should ensure that such deductions or exemptions claimed by them are in accordance with the receipts, invoices or other necessary documents maintained by them.” said an expert.
Taxpayers claiming a deduction under LTA, for instance, must have the necessary travel tickets, invoices, and other documentation. Similar to this, applicants requesting HRA tax exemption need to have a legitimate lease or rent receipts. Despite a lease or payment receipt, the IT department has the right to request confirmation that rent has been paid. Making this payment through banking channels is advised. There should be receipts to support any deductions for life insurance or medical insurance premium payments.
“It is pertinent to note that rent paid to family members may come under the scrutiny of the income tax department and may be subject to potential litigation.” said another expert.
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Tax professionals and chartered accountants insist that taxpayers keep records of the deductions and exemptions they claim. In order to receive their income tax refunds, people were emailed by the income tax department last year and asked to confirm the deductions they had claimed within 15 days.
When there was a discrepancy between the deductions listed on the ITR form and Form 16 (the TDS certificate issued by the employer), the email was sent. If the taxable income was less than in previous years, emails were also issued.
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The Income Tax scrutiny can be avoided by expecting that it will happen. If you are claiming any tax exemption or deduction, always anticipate the possibility of the tax department asking you for evidence to support your claims. To substantiate your deductions, ensure you obtain genuine and relevant supporting documents during the relevant financial year. Any subsequent exercise to create false evidence at the time of filing ITR or at the time of enquiry may not help you to prove your claim.
The Income-tax Act does not prohibit an employee from claiming HRA exemption for the rent paid to the family members. The exemption can be allowed if the claim is genuine, which should be supported by documentary evidence, like monthly payment of rent, utility bills, and the recipient offers such income in his/her ITR. To claim deductions under Sections 24(b) and 80C for home loan EMI payments, ensure you obtain an interest and principal repayment certificate from the bank.
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