NEW DELHI– As the income tax filing season is in full swing, from salaried individuals to business owners, everyone is busy filing their Income Tax Returns (ITR). However, a major shift is underway within the Income Tax Department, which is now leveraging cutting-edge Artificial Intelligence (AI) and data analytics to scrutinize tax deduction claims. This aims to curb widespread misuse of popular deduction sections and dismantle networks promoting “guaranteed refunds” through illicit means.
The Rise of AI in Tax Scrutiny
The Income Tax Department’s adoption of AI is part of a broader strategy to uncover fraudulent activities, particularly those orchestrated by agents promising “guaranteed refunds.” Officials have highlighted the extensive misuse of various popular deduction sections, including House Rent Allowance (HRA) under Section 10(13A), donations under Section 80G, and interest on loans under various provisions of Section 80. The AI system is now verifying these claims against a multitude of data sources, including TDS (Tax Deducted at Source) data, bank records, and other comprehensive sources. This advanced system can instantly detect inconsistencies between income figures reported in ITR and those found in AIS (Annual Information Statement) and Form 26AS, flagging potential errors or fraudulent attempts.
Severe Penalties for False Claims
The consequences for taxpayers caught making false claims are severe. Under the Income Tax Act, providing incorrect information for deductions can lead to substantial penalties. These include fines of up to 200% of the tax liability and an annual interest rate of 24% on the unpaid amount. For more serious violations, legal action can be initiated, potentially leading to imprisonment of up to seven years under Section 276C for deliberate tax evasion.
The Instant Recognition AI System
According to Taxbuddy, the Income Tax Department’s AI system is already exposing numerous taxpayers. This AI-powered system promptly identifies discrepancies between income data in ITRs and the figures found in AIS and Form 26AS. It is also continuously improving its ability to identify these errors. This immediate detection capability means that taxpayers can no longer rely solely on filling out forms; every claim must be supported by solid documentation. Taxpayers are advised to be cautious when dealing with agents promising “guaranteed refunds” and are encouraged to maintain detailed records to verify their claims.
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What Taxpayers Should Do Now
Given the enhanced scrutiny, Taxbuddy advises taxpayers to immediately file an updated ITR (ITR-U) to correct any errors and avoid potential penalties. Filing an ITR-U now can help taxpayers avoid severe fines and legal proceedings later. The message from the Income Tax Department is clear: transparency and accuracy are paramount.