AHMEDABAD: With increased use of artificial intelligence for analysis, the income tax department has started asking taxpayers about suspect deductions claimed for house rent and housing loan interest. According to chartered accountants, many taxpayers show that they are living in a rented property that actually belongs to close relatives. In cases where such taxpayers show they are paying rent, the receiver does not mention this rental income in their returns. Similarly, some taxpayers claim bogus housing loan interest deductions and the I-T department is seeking details about such claims as well. Chartered accountants say some salaried taxpayers use dubious means to save taxes because of the high cost of living and education and fewer deductions available.
Sources in the income tax (I-T) department said that by using artificial intelligence (AI) for analysis of I-T returns, it is easier to find patterns and anomalies. “The income heads where high numbers of discrepancies are found are house rent allowance (HRA) and home loan repayments. The misuse of these heads is under scrutiny. Other heads where rebates are claimed will also be scrutinized,” a source said. Adding that the claims and actual proof will be assessed through profiles of income taxpayers over the years.
GCCI direct tax committee chairman and chartered accountant Jainik Vakil said, “There are cases where some taxpayers have claimed rent deduction based on advice from unqualified persons. One must remember that though I-T returns are self-assessed for individual taxpayers, the department keeps a 360-degree watch. According to the rules, salaried employees get HRA as part of their salary. They need to have a rent agreement, rent payment receipts and must reside in the rented property to claim the deduction. One can get these exemptions only under the old income tax regime.”
“Inflation has risen sharply and many salaried people do not have adequate incomes to make investments to save tax,” said one chartered accountant on condition of anonymity.
Another chartered accountant, Karim Lakhani, said, “No documentary evidence is required to while filing returns for claiming exemptions and deductions. Salaried employees generally claim deduction under Section 80C for life insurance premiums, tuition fees, repayment of housing loans, PPF and mediclaim premiums under Section 80D. Salaried employees do not have any means to avoid tax liability, so they are tempted to save on tax using dubious practices. Due to the high cost of living, the government should increase basic exemption limit or standard deductions for those with salaries up to Rs 10 lakh per annum.”