4 Illegal Tax Practices That Are Still Prevalent
BANGALORE: As we draw closer to the end of the financial year, people frantically start searching for bills and proof of investment that will reduce their tax outflow. However, in the rush to get the maximum amount of tax deduction, be careful to not blur the line between tax saving and tax evasion.
The legal consequences of tax evasion can be financial as well as criminal. Economictimes.indiatimes.com has compiled a list of common, and illegal, tax evasion processes.
Submitting Fake Receipts
People often submit false receipts for expenses, ranging from fake medical bills, insurance premium receipts, LTAs and HRA exemptions. The Housing Rent Allowance is the most common receipt to be faked, although incidence has reduced after it was made mandatory to provide the PAN number of the landlord.
However, this is still not required for rents under one lakh a year, and the exemption is still falsely claimed. The penalty for such fraud can be upto 300% of the amount evaded. Also, according to Sudhir Kaushik, CFO of Taxpanner, random investigations are conducted occassionally which has lead to employers firing people who are found to have committed tax fraud.
Trying To Transfer Tax Burden
It is a common practice to transfer investments to a spouse or child to avoid paying tax on such income. However, any income produced out of transferred funds to a minor child or spouse is taxable under the transferor. Showing joint property under only one name is also an offence.
According to Arvind A Rao, a chartered accountant, "Proportionate income, as per the ownership percentage, should be added to the each of their incomes and tax will be levied on the same. If they flout this rule, interest for the period will be recovered and there is scope for penalty to be levied under section 271(1) (c)."
Not Reporting Loan Repayments
Accepting gifts of money in the form of cash to repay loans higher than Rs 50,000 and failing to report it is also considered tax evasion.
Not Disclosing Interest Income
Interest earned from bank savings up to an amount of Rs 10,000 is exempted from tax. However, TDS needs to be paid for any amount above this figure.
Also read: Seven Apps That Can Make You Save More Money
