The Income Tax (I-T) department in India has intensified its efforts to crack down on tax evaders, particularly salaried individuals who have been submitting false or incorrect income tax returns (ITRs). To aid in their efforts, the department has implemented a new artificial intelligence (AI) software capable of identifying fraudulent claims. This move comes as the department has flagged numerous returns involving tactics such as fabricating rent receipts, falsifying donations, exaggerating loan claims, and other unethical methods of evading taxes.
Previously, it was easier for individuals to elude the I-T department, but with the introduction of AI technology, the department now has a powerful tool to expose these deceitful practices. The AI software analyzes various factors and patterns to detect inconsistencies and discrepancies in the filed ITRs.
In recent times, the I-T department has issued notices to several salaried professionals, asking for explanations and evidence regarding their claims. The notices primarily pertain to exemptions under the house rent allowance, deductions for interest paid on home loans, and allowances for hiring helpers to perform official duties. Individuals with an annual income exceeding Rs 50 lakh can be reassessed within a ten-year period, while those with lower incomes can be reassessed within eight years.
Siddharth Banwat, a partner at a prominent Chartered Accountancy firm, appreciates the use of technology in combatting tax evasion, pointing out that many individuals in lower tax brackets assume their cases will go unnoticed. Consequently, they make deduction claims without actually making the corresponding payments, a practice that AI can now identify.
Furthermore, the I-T department has requested taxpayers to provide comprehensive details of the chartered accountant, lawyer, or tax professional responsible for preparing and filing their returns. This requirement further strengthens the department’s ability to hold accountable those involved in fraudulent tax practices.
The revenue department has also focused its attention on examining claims related to charity and political donations during the fiscal year 2018-19 (FY19). Budget 2019 mandated that charitable trusts maintain a unique identification number, limiting deductions only to donations made to trusts with these unique IDs for the fiscal year 2020 onwards.
As this crackdown on tax evaders continues, the I-T department endeavors to promote integrity and transparency in tax filing. By leveraging AI technology and implementing stricter regulations, the department aims to level the playing field, ensuring that all taxpayers fulfill their obligations honestly and responsibly.
