Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules

18 Jun 2025
sneha
Income Tax, ITR
Comments Off on Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules

Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules

New ITR-1 and ITR-4 Mandate Detailed Proof for Claims to Curb False Deductions

Paying taxes accurately and on time isn’t just a legal obligation—it fuels public welfare and national development. To ensure compliance, the Income Tax Act prescribes strict penalties for those who evade taxes or provide misleading information in their Income Tax Returns (ITRs).

Recent developments underscore the seriousness of such violations. As per a PTI report citing government sources, nearly 90,000 salaried individuals—working across public and private sector companies—withdrew false deduction claims worth ₹1,070 crore as of December 31, 2024. These withdrawals followed scrutiny by the Income Tax Department, which uncovered widespread misuse of deduction provisions.

What Triggered the Crackdown?

The department discovered the discrepancies during search, seizure, and survey operations. Investigations revealed that many individuals had falsely claimed deductions under sections such as 80C, 80D, 80E, 80G, 80GGB, and 80GGC, thereby significantly lowering their tax liabilities.

Interestingly, a significant portion of these false claims were filed by individuals working within the same organisations—ranging from MNCs and LLPs to private limited companies and PSUs—suggesting possible collusion or shared misinformation.

ITR Forms Updated: Detailed Disclosure Now Mandatory

To combat such fraudulent practices, the Income Tax Department has revamped the ITR-1 and ITR-4 forms, requiring detailed disclosures for any deductions claimed. The updated forms demand the following:

Section 80C: Document IDs or policy numbers for instruments like PPF, ELSS, or life insurance.
Section 80D: Insurer’s name and policy number for health insurance claims.
Home/Education Loan Deductions: Lender details, loan account numbers, and sanction dates.
Section 80EEB (Electric Vehicles): Vehicle registration number must be provided.

These changes are designed to increase transparency and discourage manipulation in tax declarations. Taxpayers are now expected to maintain and report complete documentary evidence for any claim they make.

Heavy Penalties for Misreporting or Underreporting

Under Section 270A of the Income Tax Act (introduced via the Finance Act, 2016), authorities can impose stringent penalties for underreporting or misreporting income:

50% penalty of the tax payable for underreported income.
200% penalty in cases of misreporting, such as falsifying deduction claims.

The power to impose these penalties lies with the Assessing Officer (AO), Commissioner (Appeals), Principal Commissioner, or Commissioner.

Read More: New PAN Registration Rule: Aadhaar OTP Verification Made Mandatory

With enhanced scrutiny and tighter reporting rules, the Income Tax Department has sent a clear message: dishonest tax practices will not go unpunished. Taxpayers must ensure accurate income disclosure and genuine deduction claims to avoid severe financial and legal repercussions.

As the updated ITR forms become the norm, it’s time to double-check documentation and consult tax professionals to stay compliant. False savings today can lead to costly penalties tomorrow.

Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules

Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules New ITR-1 and ITR-4 Mandate Detailed Proof for Claims to Curb False Deductions Paying taxes accurately…

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Aadhaar OTP a Must for PAN Registration: New Income Tax Portal Rule

16 Jun 2025
sneha
Income Tax, AADHAR, ITR
Comments Off on Aadhaar OTP a Must for PAN Registration: New Income Tax Portal Rule

New PAN Registration Rule: Aadhaar OTP Verification Made Mandatory

In a significant update, the Income Tax Department has introduced a mandatory Aadhaar-based OTP verification step for individuals registering their Permanent Account Number (PAN) on the official e-filing portal — www.incometax.gov.in.

This change is designed to enhance security and ensure that only genuine users are able to initiate the PAN registration process. Here’s everything you need to know about the new process and what it means for taxpayers.

What’s New in PAN Registration?

As part of the updated registration process, individuals must now:

Consent to Aadhaar Authentication: During registration, users must allow validation through the UIDAI (Unique Identification Authority of India) database.
Verify via Aadhaar OTP: A One-Time Password (OTP) will be sent to the mobile number linked with the applicant’s Aadhaar. This OTP must be entered to complete the registration.

Without completing this Aadhaar OTP authentication, the PAN registration process on the Income Tax Department portal cannot proceed.

Why Aadhaar OTP Verification Is Crucial

The mandatory Aadhaar OTP step serves multiple purposes:

✅ Enhanced Identity Verification: Helps prevent fraudulent or duplicate PAN registrations.
✅ Faster PAN-Aadhaar Linking: Simplifies the integration process as required by law.
✅ Legal Compliance: Under Section 139AA of the Income Tax Act, linking PAN with Aadhaar is a legal necessity.

What Should Taxpayers Do?

To ensure a hassle-free PAN registration process:

Check Your Aadhaar-Mobile Link: Make sure your Aadhaar is linked to an active mobile number.
Update If Needed: If your Aadhaar is not linked with a mobile number, visit the nearest Aadhaar Seva Kendra to update your contact details.
Be Ready for OTP: Once linked, keep your mobile device handy to receive and enter the OTP during PAN registration.

Read More: Income Tax Benefits for Senior Citizens: What You Can Claim in AY 2025-26

The mandatory Aadhaar OTP verification adds an essential layer of security and aligns with the government’s broader digital authentication goals. For individuals looking to register their PAN online, ensuring a valid Aadhaar-linked mobile number is now the first and most critical step.

Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules

Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules New ITR-1 and ITR-4 Mandate Detailed Proof for Claims to Curb False Deductions Paying taxes accurately…

Aadhaar OTP a Must for PAN Registration: New Income Tax Portal Rule

Income Tax Benefits for Senior Citizens: What You Can Claim in AY 2025-26

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Income Tax Benefits for Senior Citizens: What You Can Claim in AY 2025-26

12 Jun 2025
sneha
Income Tax, ITR
Comments Off on Income Tax Benefits for Senior Citizens: What You Can Claim in AY 2025-26

Income Tax Benefits for Senior Citizens: What You Can Claim in AY 2025-26

As the Income Tax Return (ITR) filing season for Assessment Year 2025-26 begins, many taxpayers—especially senior citizens—are evaluating the deductions and exemptions they are entitled to. The Income Tax Act provides several tax concessions for senior and super senior citizens to ease their financial burden and simplify compliance.

Who is a Senior Citizen under the Income Tax Act?

A Senior Citizen is an individual aged 60 years or above but less than 80 years at any time during the financial year.
A Super Senior Citizen is someone aged 80 years or above.

1. Higher Basic Exemption Limit

One of the most significant benefits for senior citizens is the enhanced exemption threshold under the Old Tax Regime:

Senior Citizens (60–79 years): ₹3 lakh
Super Senior Citizens (80 years & above): ₹5 lakh
In contrast, the exemption limit for individuals below 60 years is ₹2.5 lakh.

This means income up to these thresholds is completely tax-free, helping reduce the tax liability substantially.

2. Deduction on Medical Insurance Premium – Section 80D

Senior citizens can claim a higher deduction of up to ₹50,000 under Section 80D for:

Medical insurance premiums, or
Medical expenditure (if no insurance is taken)

This is notably higher than the ₹25,000 limit available to taxpayers below 60.

3. Deduction for Treatment of Specified Diseases – Section 80DDB

If a senior citizen incurs medical expenses for specified critical illnesses (like cancer, Parkinson’s, chronic renal failure, etc.), they can claim up to:

₹1,00,000 as deduction under Section 80DDB
For non-senior citizens, this limit is restricted to ₹40,000.

4. Deduction on Interest Income – Section 80TTB

Senior and super senior citizens are allowed to claim a deduction of up to ₹50,000 on interest income earned from:

Savings accounts
Fixed deposits (FDs)
Recurring deposits (RDs)
in banks, co-operative banks, and post offices.

This benefit under Section 80TTB is exclusive to senior citizens and replaces the earlier Section 80TTA deduction of ₹10,000 available to other individuals.

5. Exemption from Advance Tax

Senior citizens who do not have income from business or profession are exempt from paying advance tax. They can simply pay self-assessment tax before filing their return, reducing compliance hassles.

6. Relief from ITR Filing – Section 194P

Introduced in Budget 2021, Section 194P provides relief to resident senior citizens aged 75 years or above who:

Have only pension and interest income (from the same bank)
Furnish a declaration to the bank

In such cases, the bank deducts applicable tax, and the individual is not required to file an ITR.

Read More: Claiming Input Tax Credit (ITC) under GST: Essential Documents and Compliance Checklist

Senior citizens enjoy a host of benefits under the Income Tax regime to ease their compliance and reduce their tax burden. Whether it’s higher exemption limits, better medical-related deductions, or simplified filing processes, these provisions are designed to offer financial support in the later stages of life.

As the ITR filing deadline approaches, senior taxpayers should evaluate which regime suits them better (Old vs New) and make full use of available deductions to optimise their tax liability.

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Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules

Faking Tax Deductions? You Could Be Penalised Up To 200% Under Income Tax Rules