New Delhi, April 25, 2025: Filing your Income Tax Return (ITR) under the old tax regime with incorrect deductions or exemptions might land you in serious trouble. The Income Tax Department has issued a strict warning stating that fraudulent refund claims can attract penalties up to 200%, along with possible imprisonment. Salaried individuals are advised to refrain from making false claims without valid documents.
Many salaried taxpayers have been reportedly misusing deductions under the old tax regime to falsely claim refunds. The Income Tax Department has flagged this malpractice and is using AI and data analytics to detect such frauds. According to the department, this is not just a violation of tax laws but a punishable offense under Section 270A.
The department revealed through a recent awareness booklet that salaried employees are claiming deductions or exemptions in their ITRs without having proper documentary evidence. This is being done even after TDS (Tax Deducted at Source) is correctly deducted by employers based on Form 12BB submissions.
Under the old regime, employees must submit Form 12BB along with all necessary supporting documents to their employer. Based on this, the employer calculates and deducts TDS. However, it has been observed that many individuals are showing extra or fake deductions while filing ITRs, aiming to get larger refunds.
The Income Tax Department has made it clear that incorrect refund claims can lead to serious legal consequences:
Your ITR may be selected for detailed scrutiny.
If you fail to provide proof for deductions, your claims will be rejected.
Under Section 270A, you may face a penalty of up to 200% of the tax amount underreported.
In cases involving tax evasion over ₹25 lakh, imprisonment ranging from 6 months to 7 years is possible.
For smaller violations, jail time may range from 3 months to 2 years.
The tax department is using Artificial Intelligence, Machine Learning, and Big Data tools to track inconsistencies in ITRs. These tools help in cross-verifying claims and spotting patterns that indicate potential fraud.
To avoid legal issues:
Always file accurate and truthful ITRs.
Only claim deductions for which you have valid, verifiable documents.
Avoid entering false data to increase your refund.
Keep all receipts, rent agreements, investment proofs, and related documents safely for reference during scrutiny.
Claiming a refund using false information might seem like a shortcut, but it could cost you dearly. With smarter tracking and stricter laws, taxpayers are advised to play by the rules and ensure transparency in their filings.
