Warning for Salary Taxpayers: Income Tax Department to take Strict action on Past Fake Political Donation Claims:

Warning for Salary Taxpayers: Income Tax Department to take Strict action on Past Fake Political Donation Claims The Income Tax Department has started scrutinizing old tax returns where people claimed deductions for political donations. This action is being taken for last three financial years. Many taxpayers got emails and messages from the income tax department asking them to provide proof of their donations and explain the source of the funds used. The department took this move because it suspects that many people may have claimed fake or wrong deductions under Section 80GGC of the Income Tax Act.

Why donations under Section 80GGC are being checked?

Section 80GGC allows any individual to claim a 100% tax deduction for donations made to a registered political party or electoral trust. But there are some clear rules which needs to be followed:

• The donation should be done through bank methods like cheque, demand draft, debit/credit card, or online transfer.
• Donations which are made in cash or like gifts or goods are not allowed.
• The party receiving the donation must be registered under Section 29A of the Representation of the People Act 1951. The deduction is allowed up to 10% of a person's total income.

It is found by the department that some people donated money in cash or to political parties that are not registered. This is the reason why department is now asking people to recheck and correct their returns if they have made any mistakes.

What can happen if you don’t take corrective action?

If someone receives the notice from the department and doesn't reply to it or fails to provide proof, then the tax department can cancel the deduction. The person will have to pay extra tax along with a penalty. If a wrong claim is found, a penalty of 100% to 200% of the tax amount will be charged under Sections 270A and 271AAC according to the Income Tax Act. The government has given an option to file updated returns under Section 139(8A) to help honest taxpayers. Extra two years are given to taxpayers to fix their mistakes without facing any strict actions.