The Income Tax Department has advised employers to analyse mismatches in their salary-related filings as part of its crackdown on bogus tax claims, according to The Times of India. Companies and government departments have been sensitised to educate their staff against falling prey to intermediaries who encourage taxpayers to make unsupported claims in exchange for commissions. Employers have been specifically contacted to analyse the mismatch in Form 24Q relating to TDS deducted by them, as tax authorities now have data analytics tools to easily identify red flags and nudge taxpayers through targeted communications. The latest guidance comes as employers navigate the complex TDS calculation process for different CTC structures, with experts explaining that TDS is deducted every month at the average rate of tax rather than at slab-wise monthly rates.
The Income Tax Department has identified approximately 15,000-20,000 cases where taxpayers allegedly altered deductions or exemptions while filing revised or updated income tax returns, according to a report by The Times of India. The IT department is examining these cases as part of its broader compliance efforts that use data analytics and third-party information to identify discrepancies in tax filings. Tax authorities have also asked employers to review mismatches in Form 24Q, the quarterly statement filed for tax deducted at source (TDS) on salaries. The detection follows a systematic process where employers compute estimated total taxable salary income for the entire financial year, considering all salary components, allowances, and benefits before deducting appropriate tax amounts.
According to the TOI report, tax authorities have detected instances where taxpayers withdrew one tax benefit and claimed another while filing revised returns. One pattern involved employees who initially claimed House Rent Allowance (HRA) exemption based on rent paid but later removed that claim and instead sought benefits under Section 10(14) of the Income-tax Act, which covers specified allowances such as conveyance, education and allowances for working in hilly areas. The report also cited cases where taxpayers changed the category under which donations were claimed when filing updated returns, switching from deductions for donations to political parties to deductions available for contributions to research institutions. These patterns highlight the complexity of tax benefit claims and the need for proper documentation to support legitimate deductions. As per Mint, 'swapped provisions' refers to a practice where taxpayers withdraw one exemption or deduction claimed in the original income tax return and replace it with another in a revised or updated return, not because the underlying facts have changed, but solely to reduce their tax liability.
Officials quoted by TOI said that in several cases, the additional income tax involved was only a few hundred rupees. However, the department has reportedly focused on cases involving suspected discrepancies of ₹50,000 to ₹1 lakh. The exercise is part of the department's 'Nudge' campaign, under which taxpayers are encouraged to voluntarily correct discrepancies identified by tax authorities before stricter action is initiated. According to Mint, the I-T department has set an internal threshold of ₹50,000 to ₹1 lakh for reaching out to taxpayers with suspected 'swapped provisions' claims. Legal action may be initiated only in cases involving serious violations, with penalties under the Income-tax Act, 2025 extending up to 200% of the tax payable in cases involving misreporting of income. Taxpayers who voluntarily correct their returns generally place themselves in a better position than waiting for departmental action.
The latest exercise highlights the department's increasing reliance on data-driven compliance measures to identify potential mismatches and incorrect claims in tax returns. Income tax return forms have been updated over time to capture additional information on items such as health insurance, education loans and electric vehicle loans. These updates allow tax authorities to compare taxpayer claims with information available from other sources. With tax authorities now armed with data analytics tools, it is easy to identify red flags and then nudge taxpayers through targeted communications by sharing relevant data. According to Mint, the tax department is identifying such inconsistencies through data analytics by reconciling ITRs with Form 16, Form 24Q, AIS, TIS and other third-party information. In most cases, officials have said that taxpayers voluntarily comply and correct or update their returns when discrepancies are brought to their attention.
