Income Tax: A recent media report indicates that approximately 90,000 salaried employees from both public and private sector organizations have submitted tax deduction claims totaling Rs 1,070 crore as of December 31, 2024.
The Income Tax Department possesses comprehensive data from various sources, enabling it to identify erroneous claims with relative ease. Employers determine tax deductions based on the documentation and receipts provided by their employees. Neeraj Aggarwal, a partner at Nangia & Co, stated, “The employer receives such documents from employees and cannot independently verify their authenticity beyond basic checks.”
Employees have the option to circumvent the review process
Employees have the option to circumvent the employer’s review process by directly claiming deductions. Agarwal explained, “An employee can obtain a refund for any excess tax withheld by the employer by directly claiming the relevant deduction in their income tax return (ITR). This excess tax can be adjusted against other income by requesting a refund.”
Counterfeit tickets and invoices are often utilized
Typically, employers request proof of deductions claimed by employees during the period from January to March. Some employees resort to creating fraudulent documents using software to secure these deductions. Additionally, counterfeit tickets and invoices are often utilized to claim travel allowances (LTA). Fraudulent activities also include making fictitious donations to charitable organizations or political entities, with donors frequently receiving their money back after paying a nominal commission.
Expert opinion
Incorrect claims are also prevalent concerning house rent allowance (HRA) during tax return filings. Naveen Wadhwa, vice-president of research and consulting at Taxmann, noted, “Many taxpayers claim this exemption without actually making payments to their landlords.”