Latest news with #NiyatiShah
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Business Standard
4 days ago
- Business
- Business Standard
Political donations, medical claims:How to avoid I-T scrutiny on deductions
The Income Tax Department has searched 200 places nationwide to clamp down on bogus tax deductions, news agency ANI reported on Monday. The searches were at individuals and intermediaries suspected of inflating claims under key sections of the Income Tax Act, including political donations (Section 80GGC), tuition fees, and medical expenses. ANI quoted unnamed sources as saying that the crackdown follows the detection of fake bills and misuse of exemptions, with several intermediaries allegedly facilitating fraudulent claims. Why are these deductions under scrutiny 'These categories are vulnerable to misuse as they rely heavily on self-declared documents and are relatively easier to inflate or fabricate because they are not verified at the time of filing,' Niyati Shah, chartered accountant & vertical head – personal tax at 1 Finance, told 'Business Standard'. 'Political donation receipts may be issued by lesser-known entities, tuition fee payments might be claimed even for non-eligible institutions, and inflated or unrelated medical bills may be shown under critical illness deductions,' she said. Political donations accounted for over Rs 10,000 crore in tax claims in a single year, with a tenfold surge between FY17 and FY22, said Shaily Gupta, partner at Khaitan & Co. 'More than 650,000 taxpayers are currently under scrutiny for suspicious deductions, including 400-plus tech professionals linked to a Rs 110 crore refund racket,' she said. Political donations are flagged due to concerns about 'tax evasion, money laundering, and misuse of tax exemption provisions,' particularly where contributions seem inconsistent with the donor's income or are made to shell entities, noted Ritika Nayyar, partner at Singhania & Co. Bogus claims 'If claims are found to be bogus, deductions are disallowed, and the taxpayer's income is recomputed,' Shah said. 'Penalties under Section 270A for misreporting income can reach up to 200 per cent of the evaded tax, and in severe cases, prosecution under Section 277 may follow.' Even if taxpayers claim they were misled by intermediaries, 'ignorance is not a defence,' Gupta cautioned. Experts say maintaining records will help if their tax claims are scrutinised: -For political donations, retain digital payment proof and valid receipts from registered parties. -For tuition fees, preserve official receipts from recognised institutions. -For medical expenses, maintain insurance details, hospital bills, and prescriptions. 'Cross-verify that claims align with Form 26AS and AIS, and avoid cash transactions which are ineligible for deductions,' Shah said. Can AI tools like TaxAssist help? While the tax department's AI-driven TaxAssist tool can guide taxpayers and flag anomalies, it is not a substitute for professional advice. 'AI may simplify compliance for basic cases but cannot replace expert judgment in complex or high-value filings,' Nayyar said. Taxpayers are urged to file honest returns and avoid shortcuts that may trigger scrutiny. 'Compliant documentation is the best protection against adverse tax action,' Gupta stressed.
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Business Standard
07-07-2025
- Business
- Business Standard
Changed jobs recently? Here's how to file ITR without any errors
If you switched jobs during the last financial year, filing your income tax return (ITR) could be a bit tricky. With multiple Form 16s, possible TDS mismatches, and lump-sum payments like gratuity or PF withdrawals in the mix, even a minor slip-up can invite a notice from the tax department. Experts break down the common pitfalls and share tips to help you file your return smoothly. Don't miss income from previous employer 'One of the biggest mistakes taxpayers make is reporting income from only their latest employer and forgetting the salary earned from the previous one,' says Niyati Shah, chartered accountant and vertical head, personal tax at 1 Finance. 'This leads to underreporting of income and can trigger a notice from the tax department.' Deepesh Chheda, partner at Dhruva Advisors, points out that employees also often fail to inform their new employer about income from the earlier job using Form 12B. 'As a result, the new employer calculates tax only on the current salary, which often leads to insufficient TDS and a higher tax liability at filing time,' he says. Consolidate multiple form 16s To file your return correctly, start by collecting Form 16 from each employer you worked for during the financial year. Add up salary details from Part B of all Form 16s (gross salary, deductions, exemptions). Cross-check TDS details in Part A against your Form 26AS and Annual Information Statement (AIS). 'Use Form 26AS as the backbone for reconciliation. Filing your ITR based on consolidated income ensures transparency and helps you avoid tax notices later,' Chheda advises. Kinjal Bhuta, CA and secretary of the Bombay Chartered Accountants' Society, adds, 'When claiming deductions like 80C (investments) or 80D (health premiums), make sure you don't double-count them. These limits apply to your total income, not to each job separately.' Handle TDS mismatches proactively After a jobswitch, it's not unusual to see differences between TDS in Form 16 and what's reflected in Form 26AS or AIS. 'If there's a mismatch, reach out to the employer and request them to revise their TDS return (Form 24Q),' says Shah. Sujit Sudhakar Bangar, founder of recommends that taxpayers always file their ITR as per the TDS credits in Form 26AS. 'If the employer doesn't rectify the error, you may need to pay the shortfall to avoid a tax demand later,' he warns. Report lump-sum benefits correctly Benefits like gratuity, PF withdrawals, and leave encashment during a job switch need careful reporting. Gratuity: Tax-free up to ~20 lakh for eligible employees. Leave encashment: Exempt up to ~25 lakh for non-government employees. PF withdrawals: Tax-free only after 5 years of continuous service; otherwise, taxable. 'A common mistake is ignoring these receipts or reporting them incorrectly, which can invite scrutiny,' Bhuta cautions. Checklist for job switchers filing ITR -Collect Form 16 from all employers. -Reconcile income and TDS with Form 26AS/AIS. -Avoid double-claiming deductions like 80C, 80D, or HRA. -Report gratuity, PF withdrawals, and leave encashment properly. -File as per Form 26AS even if there's a mismatch with Form 16. The Bottom Line Switching jobs mid-year adds complexity to tax filing. But a little diligence now, consolidating Form 16s, checking Form 26AS, and correctly declaring lump-sum benefits can help you avoid unnecessary notices and penalties. 'A few extra steps today can save you major headaches tomorrow,' Shah says.
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Business Standard
03-07-2025
- Business
- Business Standard
New cost inflation hike by CBDT brings relief for property sellers: Experts
'The higher cost inflation index helps cushion sellers from rising prices, lowering their taxable gains,' say experts, making long-term property sales more tax-friendly. The Income Tax department has notified the Cost Inflation Index (CII) for the financial year 2025-26 at 376, up from 363 last year. While this may sound like a any other ordinary number, it is of great significance for taxpayers selling long-term assets, particularly real estate acquired before July 23, 2024. Here's how experts break it down. CII: A cushion against inflation 'The Cost Inflation Index (CII) of 376 is not just a number, it's a powerful mechanism to adjust the purchase price of long-term assets for inflation,' says Niyati Shah, chartered accountant and head of personal tax at 1 Finance. For property owners, the higher CII allows for a substantially increased indexed cost of acquisition, effectively lowering taxable capital gains. Shah explains, 'This is especially impactful for those selling high-value real estate and legacy assets. The higher the CII, the more it cushions sellers from inflation-led erosion of asset value and helps preserve post-tax returns.' Who can claim indexation? Post the Finance Act 2024, indexation benefits are now preserved for assets bought before July 23, 2024, and only certain taxpayers can claim them. As Pawan Kumar Agarwal, managing director of Nklusive, points out, 'Individuals and HUFs, being normal residents of India, are still eligible to claim indexation benefits, but only for land and building purchased before July 23, 2024, and held for over two years.' Assets like gold, stocks, or any other capital asset no longer qualify for indexation benefits, even if bought before this cut-off. 12.5 per cent Flat Tax vs 20 per cent with Indexation: Which is better? A key decision for taxpayers now is whether to pay 20 per cent LTCG tax with indexation or opt for a 12.5 per cent flat tax without it. Shah advises, 'Indexation meaningfully increases the cost of acquisition, especially for long-held assets. For older properties, the 20 per cent rate with indexation often results in lower effective tax.' To illustrate, she says, 'A flat bought in June 2010 for Rs 30 lakh and sold in October 2025 for Rs 1 crore would attract Rs 8.75 lakh tax without indexation. But with the latest CII of 376, the inflation-adjusted cost becomes Rs 67.5 lakh, and tax reduces to Rs 6.49 lakh, a saving of over Rs 2.25 lakh.' Experts urge computation before choosing 'Taxpayers should compute both options and choose the one with lower liability,' suggests Agarwal. 'For long-held assets, indexation remains advantageous in most cases. But for assets with modest gains, the 12.5 per cent flat rate could be more efficient.' Vivek Jalan, partner at Tax Connect Advisory Services LLP, echoes this, adding that for assets like real estate held for decades, 'indexation often wipes out the LTCG exposure entirely or reduces it significantly.' Documentation is key Experts also caution taxpayers about compliance. Abhishek Singh, director at V3 Infrasol, highlights common mistakes. 'Using the wrong CII year, ignoring improvement costs, or misreporting acquisition year can lead to higher taxes or scrutiny. Retain all original deeds, receipts for improvements, and calculate carefully.' Real estate market adapts to tax changes From a property market perspective, Manjunath HR, managing partner at Aakruthi Properties, observes, 'Many sellers rushed to offload properties before the July 2024 deadline to retain indexation benefits. But even now, understanding tax implications is critical for optimising returns, especially in premium and luxury housing segments.' Key takeaway If you own property acquired before July 23, 2024, the new CII value of 376 offers meaningful relief in computing long-term capital gains. But deciding between the old and new tax regimes isn't straightforward. As Shah summarises, 'It's not a one-size-fits-all decision. Do the math or consult a tax advisor to pick the most tax-efficient route.'
