Salaried Person Claimed Fake Exemption/ Deduction in ITR: What are Consequences

Many Salaried Taxpayers are seen claiming fake exemptions [Like House Rent allowance (HRA), Leave Travel Allowance (LTA) etc.] or deductions [Like 80C, 80D, 80 CCD, 80DD, 80G etc.] for reducing Tax liability or increasing Income Tax Refund at the time of filing Income Tax Return (ITR).

What are the consequences of claiming a Fake Exemption/ Deduction?

1. You can Summon u/s 133(6) for claiming exemptions or deductions in your ITR:

• Give a proper reply and submit all the relevant proof on time.
• File ITR-U and correct the excess exemptions or deductions claimed in your ITR.

2. You may be issued Scrutiny Notice u/s 143(2) or Income Escaping Notice u/s 147

• You cannot file ITR-U now.
• You need to proceed legally by submitting the reply.
• Income Tax Officer can levy a Penalty of up to 200%.

3. Your PAN will be flagged for future years as well.

How to Avoid This?

• Be very careful in ITR filing. Best to avoid any kind of fake claim or exemption.
• File Revise Return if any Fake Exemption/ Deduction claimed.
• File Updated ITR (ITR-U) if the time limit for revising the Return has expired.