New trick of taxpayers caught: 20,000 people doing ‘tax swapping’ in revised ITR on radar; 200% fine will be imposed, know what is the whole matter

The Income Tax Department has launched the biggest and most modern technical campaign till date against taxpayers filing Income Tax Returns (ITR). The department, with the help of advanced data analytics, Artificial Intelligence (AI) and modern digital tools, has identified around 15,000 to 20,000 suspicious cases across the country where taxpayers have allegedly evaded tax by hiding their actual taxable income. ‘Tax Swapping Provisions’ Have resorted to.

According to a reliable report, this entire action is an important part of the department’s nationwide campaign to curb fake tax claims and illegal deductions. In this series, the Income Tax Department has also made direct contact with the big employers and companies of the country. The department has given strict instructions to the companies to register the TDS deducted on the salaries of their employees. Form 24Q Re-check the details carefully and report any discrepancy or error found.

What is this whole matter of ‘tax swapping’?

The tax department is preparing to crack down mainly on those dodgy cases who had claimed something else while filing their original income tax return (Original ITR), but when that claim appeared to be stuck, they completely swapped their tax exemptions and deductions in the revised or updated ITR filed later. The department’s internal investigation has revealed that such suspicious claims range between ₹50,000 to ₹1 lakh.

Let us understand this with an easy example:

• Case 1: Some salaried employees claimed huge House Rent Allowance (HRA) exemption in their original ITR. But when the department asked for the rent agreement or the landlord’s PAN card, he panicked and filed a revised return, completely deleting the HRA claim. Instead of Income Tax Act to save tax Section 10(14) Added new fake exemptions to other allowances (such as travel, children’s education or special allowances related to hilly areas) under the Act.

• Case 2: In some cases, taxpayers had earlier sought tax exemption on donations made to political parties. Later, when he feared that his receipts would be declared invalid, he removed that donation in the updated return and filed a new claim of fake donation given to ‘research institutes’.

First a chance to improve (Nudge Campaign), then strict action will be taken

Tax officials clearly say that all these 20 thousand identified cases will be scrutinized and thoroughly investigated. However, instead of taking any punitive action immediately, the department will first consider its special ‘Nudge Campaign’ Will run. Under this, a soft reminder or alert will be sent to the registered mobile number and email of the taxpayers, so that they can accept their mistake and voluntarily correct it. If even after this the taxpayer does not rectify his mistake, then strict legal and punitive action will be initiated against him.

Chartered Accountant’s Opinion: HRA and Section 10(14) are not substitutes for each other

According to renowned chartered accountant Suresh Surana, “In tax parlance, swapping is a situation when a taxpayer, out of fear of being caught, withdraws a tax claim which he cannot prove with documents, and without any valid basis, adds another exemption or deduction in its place with the sole purpose of reducing the tax liability.”

CA Surana says that doing so is completely illegal and falls in the category of financial fraud, because each exemption available under the Income Tax Act has its own purpose, eligibility, maximum limit and documentary rules. For example, HRA exemption under section 10(13A) is valid only if the employee is actually residing in a rented accommodation, paying rent to the landlord and the HRA share is included in his salary slip. At the same time, Section 10(14) is available only on those selected allowances which the company gives to its employee for any special official work or extraordinary expenditure. Therefore, you can never exchange one claim for another without a valid receipt and voucher.

If caught, heavy penalty of up to 200% and jail

Nowadays the Income Tax Department has a robust digital grid of Form 16, AIS, TIS and salary data sent by the employer. The department’s AI system detects irregularities within seconds by analyzing your return patterns over the past several years. If your claim does not match the company’s records, it will be considered a serious offense of under-reporting or deliberate misreporting.

strict rules: of Income Tax Act section 439 Under this Act, if a wrong or artificial claim is detected, the department will deduct the total amount of tax payable from the taxpayer. Heavy fine up to 200% Can hit (penalty). Additionally, the outstanding tax and monthly compounded interest thereon will be recovered separately.

If a mistake has already been made unknowingly, then 4 ways to reduce the loss:

If you too have made such a false claim in the past under the influence of an agent or by being misled, and now the legal timeline for filing amended or updated returns has ended, then to avoid heavy penalties, you can adopt the steps given below:

1. Deposit correct tax and interest instantly: Even if the option to correct returns has been turned off on the portal, you can recalculate your correct income and immediately deposit the excess tax and interest in the government treasury through a tax challan. This will prove your voluntary compliance and honesty in the eyes of the department.

2. Application for special permission: taxpayer of income tax law Section 239(3)(b) Under this, one can seek special administrative permission to make corrections in the return even after the deadline by giving a written application to the concerned Income Tax Commissioner or Department. However, its approval is entirely at the discretion of the department.

3. Respond to the notice completely and accurately: If you receive any discrepancy notice or email from the department, do not make the mistake of ignoring or hiding it. Cooperate fully with the department, admit your mistake and agree to immediately withdraw the incorrect claim.

4. Appeal for waiver of fine: If you deposit your actual tax and interest before you receive the notice or the scrutiny begins, you have a very strong legal case before the Assessing Officer to get the penalty reduced or the penalty waived off altogether in future.