Penalties For Misreported Income: Income Tax Department Recommends Filing Revised ITR

The Income Tax department has recommended taxpayers correct any inaccuracies in refund claims or exemptions by filing revised returns for the ongoing assessment year and updating filings for previous assessment years. The deadline for filing  ITR for the AY 2023-24 was 31st July 2023. 

If you missed this deadline, you can still submit a belated return until December 31, 2023. Failure to rectify income misreporting may lead to penalties and prosecution proceedings under the provisions of the Income Tax Act, 1961, cautioned the I-T department in a post on X (formerly Twitter).

Tax authorities have urged taxpayers to precisely disclose the following deductions and exemptions in their Income Tax Returns (ITR):

1. House rent paid

2. Interest paid on education loan

3. Principal and interest on home loan

4. Health insurance premium paid for self and family

5. Deduction for disabled individuals

6. Donations to political parties/charitable institutions/trusts

When asserting deductions or exemptions in your ITR, it is essential to ensure the authenticity of all claims. The post emphasized the importance of genuine deductions supported by accurate payments and documentation, cautioning against any actions that may lead to the misreporting of income.

What Are The Consequences of Reporting Income Inaccurately?

If an individual makes false claims for deductions under the Income Tax Act, it constitutes a form of tax evasion, leading to potential penalties imposed by tax authorities, as explained by the sources. 

With the implementation of Advanced Information Systems (AIS) and Transaction Information Systems (TIS), tax authorities possess detailed data on taxpayers, enabling thorough examination of claimed deductions and exemptions.

Tax evasion encompasses actions like underreporting income, inflating expenses, or making false claims for deductions to reduce tax liability. Some potential penalties include:

1. Penalty under Section 270A: Imposed for under-reporting and misreporting of income. The penalty can be 50% of the tax payable on under-reported income or 200% if misreporting is involved.

Cases considered as misreporting of income include misrepresentation or suppression of facts, unrecorded investments in books of account, unsupported expenditure claims, false entries in books of account, failure to record relevant receipts, and failure to report international transactions.

2. Penalty under Section 271(1)(c): Deals with concealment of income or furnishing inaccurate particulars of income. A penalty of 100% to 300% of the tax sought to be evaded may be levied.

3. Penalty for Failure to Pay Self-Assessment Tax (Section 140A(3)): Determined by the Assessing Officer.

4. Offences under Section 276C(1): Wilful attempts to evade tax or failure to furnish returns may lead to imprisonment and fines depending on the severity.

How To Rectify Mistakes?

If you have filed returns with inaccurate information, you can file revised returns under Section 139(5) of the Income Tax Act. This provision allows taxpayers to correct errors or omissions. Additionally, if your initial ITR is unverified, you can use the 'Discard' option on the income tax portal.

As the deadline for filing ITR has passed, you must file belated returns under Section 139(4). Belated returns incur a penalty under Section 234F, amounting to Rs 5,000 (reduced to Rs 1,000 for total income below Rs 5 lakh). 

Interest under Section 234A is charged at a rate of one percent per month or part thereof on the unpaid tax amount in the event of a belated filing.

Also Read: From December 15, 2023, a 6-digit HSN Code is Mandatory for GST E-invoices

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