If you have not yet filed your income tax return, do it as soon as possible. 15 September is the last date to file ITR. If you have not filed the return even by this date, then you will have to pay late fees. Filing an income tax return is an important financial responsibility of every taxpayer, in which they have to declare their actual income correctly.
Some taxpayers inadvertently underreport or misreport their income, which may cause them to face a penalty. Whether it is due to confusion about taxable income or due to negligence, underreporting or misreporting income can have many consequences. You may even go to jail. Let’s know in detail.
What is underreporting income?
When a person shows less income than his actual earnings and hides the taxable part, it is called underreporting of income.
What is misreporting income in ITR?
Misreporting is when a person provides incorrect or misleading information about the type, source, or level of his or her income. This includes providing incorrect income details, claiming benefits or allowances for which one is not eligible, or providing false information about the source of income.
Why is it important to provide correct income information in the ITR?
By providing correct information about your income, you can avoid serious financial, legal, and reputational risks. Under the Indian Income Tax Act, there can be many consequences for under-reporting or misreporting income. These include additional tax and interest, penalty, notice, and even prosecution.
What action can be taken?
Section 270A
This provision covers the penalty for under-reporting or misreporting of income. If the Assessing Officer (AO) finds that you have shown less income than your actual income, misclassified income, or claimed deductions for which you are not eligible, then 50% of the tax payable on the underreported portion will be levied as a penalty.
Misreporting includes deliberately providing false information, creating fake invoices, or concealing facts. In such a case, the penalty can be up to 200% of the tax payable on the misreported income.
Interest will be charged.
Apart from the penalty, interest is levied under sections 234A, 234B, and 234C on delay in filing or paying tax. If tax is due or under-deposited due to underreporting of income, interest will continue to be charged on it.
The notice will come home
If the tax department finds discrepancies in third-party reporting, AIS, Form 26AS, bank data, or other details, they can initiate assessment, send notices, or seek clarifications/documents. According to tax experts, in some cases, giving wrong information can also cancel the actual deductions and exemptions.
Can lead to jail
Tax expert Balwant Jain told Patrika.com that under-reporting or misreporting of income for income tax evasion can lead to prosecution, fines, or even jail.