Taxpayers sometimes end up in trouble by submitting fake bills to lower the tax liability. However, the reality is different as the Income-tax department have all the eyes around your transactions. A small mistake will lead to hefty payments and punishments.
March 31 is just around the corner, and you would do whatever you could to save the maximum tax. It is that time of year when your HR department receives many calls. However, you may be in the constant pressure to submit bills, but make sure you only provide your actual bills, as submitting fake bills may end up with an Income. Fake Bills sub-report notice that will not save you tax.
Submitting Fake Bills doesn’t Save Taxes
Many companies offer their employees reimbursement for a few expenses to claim the refunds and reduce the tax liability; the employees are supposed to provide bills as proof of expenditure.
The repayments are only available for medical expenses, air or train travel tickets if you have the documentary evidence of that. Other than those reimbursements, employees can provide rent receipts to claim house rent allowance (HRA) tax exemption and to lower the TDS deduction.
Many who do not have the actual bills of the expenditures listed above will be tempted to send fake bills and get reimbursements. Well, that’s not a great idea because if you are trying to furnish counterfeit bills, the Income Tax Department will catch you red-handed.
How is Income Tax Department Going to Catch You?
There are mostly three forms that, if you furnish fake bills and they are as follows, the IT department will capture you:
- If that individual’s ITR is chosen for review, and the individual can not provide convincing evidence to substantiate his arguments, then the Department will send a notice and the taxpayer will have to respond.
- If the Tax Department asks the employer to provide supporting evidence for source tax deducted (TDS) calculated under Section 192 and employee bills are not found to be genuine.
- If, through search or survey, the tax department receives some information indicating that the employee claimed a deduction based on false bills.
Lastly, you should be aware that the Income Tax Department keeps a watch on all of your financial transactions, as banks are expected to inform the IT department about all the high-value transactions.
Do not Ever Submit Fake Bills or Receipts
If an employee submits fake bills to claim exemptions to reduce tax liability, then that amounts to a case of income misreporting to minimise tax liability. The assessing officer may launch a scrutiny case against the person in such a situation, and it is the role of the taxpayer to prove that the bills are genuine.
The Penalties Faced by the Taxpayer
- Penalties for misreporting or under-reporting of income are reported, if claims are found to be fake; “as per section 270A (1), if income is under-reported, a penalty of 50 per cent will be levied. Where income under-reporting arises from income misreporting, a fine of 200 per cent may be imposed. Hence, the voluntary submission of fake bills by a person to misreport the revenue would attract a penalty of 200 per cent.
- However, an assessee is liable to pay interest under Articles 234A, 234B and 234C of the Income Tax Act.
- Additionally, other benefits such as leave travel allowances can be obtained only through the employer, i.e. they can not be claimed at the time ITR is registered.
- If an employee does not meet the conditions for claiming tax deductions in respect of any allowance, which is part of his salary package for a financial year, it is added to his income and taxed accordingly at the rates applicable to his taxable income.
- Any reimbursement of expenses incurred for official purposes, e.g. travel on official duty, by the employer, is exempt from tax to the extent of the costs incurred.
Although your claims may be genuine if they are paid in cash, the assessing officer (AO) may sometimes find it difficult to prove this. Hence, keeping track of all the original bills and receipts is essential to the taxpayers. If these payments are made through bank accounts or credit cards or electronic modes, then it will become easier to prove that they are genuine.
What You Should Do?
Be aware of yourself that, the revenue tax department records your every financial transaction. If you had any high-value cash transaction, the bank has the right to report the same to the IT department. For the same purpose, the tax department will ask you to provide documents and transactional proofs like bank account statement.
If you can not offer the same, the Department will then reject your claim and ask you to pay additional income tax along with interest and penalty.