These days everyone is busy filing Income Tax Returns (ITR). To save tax money, many times taxpayers make the mistake of hiding income or giving wrong information. But do you know that even a small mistake of yours can put you in big trouble? If this mistake of yours is caught by the Income Tax Department, then a huge fine can be imposed on you.

If you show less income in your Income Tax Return (ITR) or do not disclose the income from any source, then it can cost you very dearly. Under the Income Tax Act, concealing income (Concealment of Income) or giving wrong information (Misreporting of Income) is considered a serious offense. The Income Tax Department now has such smart systems that keep an eye on your every financial activity.

Many times people inadvertently declare their income less. According to Section 270A of the Income Tax Act, if you have under-reported your income, then a penalty of up to 50% of the tax due on the income on which you have not paid tax can be imposed. For example, if you hid income of ₹ 2 lakh and the tax due on it was ₹ 60,000, then you may have to pay a penalty of ₹ 30,000.

If it is proved that you have knowingly given wrong information, such as submitting fake bills, showing false expenses or using fake documents, then the penalty is even heavier. Under Section 270A, in such a situation, a penalty of up to 200% of the tax due on the hidden income can be imposed. That is, if you saved tax of ₹ 60,000 by giving wrong information, then you can be fined ₹ 1,20,000.

This matter is not limited to just fines. If tax evasion is done intentionally and the amount of tax evaded is more than ₹ 25 lakh, then the Income Tax Department can prosecute you. Under section 276C, there is a provision of imprisonment from 3 months to 7 years on conviction. This is one of the harshest punishments, so do not be careless about tax.

Now the Income Tax Department is not dependent only on the information given by you. The department matches all the data, like your AIS (Annual Information Statement), Form 26AS, GST returns, bank transactions, credit card expenses, and purchase and sale of property. The AI-based system analyzes all this data and immediately catches any kind of mismatch, and your case is selected for investigation.

Yes, this is possible in some cases. If you realise your mistake and file a revised return (Section 139(5)) or an updated return (Section 139(8A)) and pay the full tax and interest before the Income Tax Department sends you a notice, you can avoid the penalty. Also, if you cooperate fully with the investigation and can prove that the mistake was inadvertent, you can get relief from the penalty.

No, not every notice means a penalty. Sometimes the department sends you a notice seeking clarification on some information or asking about a general discrepancy. It is important to respond to the notice promptly.