The Income tax department has recently sent messages to numerous taxpayers regarding claims of deductions under Section 80GGC.
A typical message reads as follows:
How much tax do I have to pay? Calculate now
Dear Taxpayer, XXXXX SINGH (AAAASXXXXN)
It is observed that you have claimed deduction under section 80GGC of Rs 600000 in your ITR for A.Y. 2022-23. It is requested that the claim may be verified and mistake, if any, may be rectified by updating the ITR by 31.03.2025.
Warm regards
Income Tax Department
What is the deduction under Section 80GGC?
Section 80GGC allows taxpayers to claim deductions for contributions made to eligible political parties and electoral trusts. This deduction aims to encourage political funding. The entire amount contributed is eligible for deduction, provided it is not made in cash. Cash contributions are disallowed under this section. Taxpayers opting for the new tax regime under Section 115BAC cannot claim this deduction.
What does this message mean?
This message serves as a proactive measure by the Income tax department to ensure the accuracy of deductions claimed by taxpayers. It seeks to verify whether the claimed deductions under Section 80GGC are genuine.
What should taxpayers do?
If you genuinely claimed the deduction: Ensure you have all the necessary supporting documents, such as donation receipts and bank statements, to substantiate your claim. For example, if you donated Rs. 1,00,000 to a registered political party, have the receipts and bank statements ready. Also, ensure that such a political party is genuine.
If the deduction claim is not genuine: Update your ITR by removing the incorrect claim and file an updated return for FY 2021-22 or FY 2022-23, as applicable. Taxpayers can file an updated return within 24 months from the end of the relevant assessment year. For FY 2021-22, the updated ITR can be filed by 31.03.2025. An additional tax of 25% or 50% is applicable on the updated return. For FY 2021-22, the additional tax is 50%, while for FY 2022-23, it is 25%.
Consequences of not filing an Updated ITR
If the taxpayer does not update their ITR, the Assessing Officer (AO) may issue a reassessment notice. The AO can initiate proceedings if he has information suggesting that some income has escaped assessment.
If the deduction claim is found to be inflated or fake, the AO may impose penalties in addition to the tax and interest payable. The penalty may be levied at the rate of 50% of the tax payable on under-reported income or 200% where under-reported income is a result of misreporting.
Conclusion
If you receive such a message, it is essential to act promptly. Double-check your deduction claim, gather the necessary documents, and make corrections if needed. By addressing the issue early, you can avoid penalties and additional scrutiny from the Income tax department.