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How to guard against these 5 tax evasion practices
March, 30th 2015

March 31 marks the end of the tax-saving season and the beginning of the tax-filing season. Everyone will soon get busy collecting proofs of investment and try to minimise their tax outgo. However, in the hurry to get maximum deductions, do not cross the thin line between tax-saving and taxevasion. The repercussions can be both monetary as well as legal. Here is a list of five common tax-evasion practices. Are you committing any of these mistakes?

Submitting Fake Receipts

Employees often submit false rent receipts for claiming HRA exemption.After it became mandatory to declare the PAN number of your landlord, fake receipts have come down to some extent. However, you still need not declare PAN if the rent is less than Rs 1 lakh per year. If you submit a false rent receipt under this section, you can get a tax notice under Section 271(1)(c) for furnishing of inaccurate particulars of income for which the minimum penalty is 100% of tax sought to be evaded and maximum 300%. "False medical bills and claiming LTA without actual travelling are also common.There have been cases where random investigation has happened and employees have been fired," says Sudhir Kaushik, CFO and co-founder, Taxspanner. Many also claim tax benefits under Section 80C by submitting fake insurance premium receipts.

Claiming Both Hra & Housing Loan Benefits

The salaried who have an HRA component and are also servicing a home loan often claim deductions for both -tax benefit under Sec 80C and Sec 24 for repay ment of housing loan and HRA benefits under Sec 10(13A) for rent paid.This is allowed under exceptional situations -when you, for some reason, are unable to stay at the property you own. "Dual claim is allowed when a person is staying in another city on rent while the property bought is in a different location," says Anil Rego, CEO of Right Horizons, a wealth management firm. If the two are in the same city , it will be difficult to convince the I-T department.

Trying To Transfer Tax Burden

People commonly transfer investments in the name of their spouse or children and invest in instruments generating taxable income to take advantage of the tax slabs. However, any income generated out of funds transferred to spouse or minor child is clubbed in the hands of the transferor and taxable. Showing rental income from joint property under only the non-working spouse's name is also tax evasion. "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)," says Arvind A Rao, a chartered accountant and certified financial planner.

Not Reporting Loan Repayments

Accepting cash or repayment of loans from friends and family in cash for amounts higher than Rs 50,000 and not reporting it is also evasion.

Not Disclosing Interest Income

Interest earned up to Rs 10,000 from bank savings is exempt from tax. However, avoiding TDS by misusing Forms 15G and 15H is an offence. Some try to split the amount in two or three accounts to misguide. However, that doesn't help as your PAN will still be the same.

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