Bogus Claims: A Recipe for Sleepless Nights

During every Income Tax Return filing season, I receive numerous calls from salaried employees asking if I can secure them a tax refund by showing false expenses.

Some professionals, who work directly for foreign companies and are paid via payment apps, also engage in the deceitful practice of not declaring such income for tax purposes.

Similarly, business enterprises and working professionals claim expenses that are not supported by purchase invoices to reduce their tax liability.

Even Non-Resident Indians who have sold property in India claim expenses like interior decoration, furniture, and brokerage as deductions, which are not backed up by bills, when computing capital gains tax.

To all these people seeking my advice, I have only one thing to say: What you are doing is a complete violation of the tax laws in India. This is a perfect recipe for sleepless nights.

Today, the tax department is equipped with modern tools to track every type of transaction, from banks to stock brokers. There is a high chance of being caught by the department if bogus expenses are claimed or genuine income is not declared. The tax department can open files from the past 10 years. If they find irregularities in your income declarations, you will be heavily penalised.

This pennywise, pound-foolish idea of saving peanuts can cause a ripple effect of unintended hardships:

Tax Notices: A notice can come at any time within the next 10 years. Isn’t that too long a period to risk?

Information to be shared: After receiving a notice, you will be asked for all the information for the year in question and the two preceding years. The lengthy notices span 3-4 pages and ask over 20 questions. Most people won’t have so much information or documentation to prove their claims.

Prolonged Scrutiny: These notices won’t get resolved in one attempt. Once you receive a notice, the process can last for 18-24 months.

Heavy Penalties: If you have made bogus claims or underreported income, your penalty may go up to 200% of the tax liability.

Severe Consequences: In cases of fake entries in the books of accounts, like forged or falsified documents, the penalty equals the sum of such false or omitted entries.

Friends, this short note is not to scare you but to enlighten you about the facts: false narratives will cost you dearly if caught by the tax department. Remember, tax is only a portion of your total earnings. If you resort to evading taxes, there is a high chance you will end up paying tax plus penalties equal to your total earnings!

I am sure you are wise enough to decide whether to pay a portion of your income as taxes or your entire income as penalties in the future!

Have a good day.

Please follow and like us:
5 9 votes
Article Rating
Share This :

About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 28+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional, Registered Valuer (F&SA) and Social Auditor.Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

Check Also

Have you declared your Indian income in your home country? Fact-check please

This Saturday, I got a call from a gentleman residing in Germany, telling me that …

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x