Used donation to a political party for income tax deduction? IT dept is sending warning SMS; if it was a mistake file ITR-U by March 31, 2025
The Income Tax Department has a warning message for all taxpayers including the salaried class as it asks taxpayers to verify the section 80GGC political party donation claim and if there is any mistake then file ITR-U on or before March 31, 2025, for AY 2022-23 (FY 2021-22). Similar messages are being sent to taxpayers for AY 2023-24 asking them to update their ITR by 31 March 2025.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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This warning message is being disseminated to income taxpayers who claimed section 80GGC deduction on donation to a political party.
Experts say this warning message by the tax department is a reminder for those taxpayers who falsely claimed this deduction. If you have genuinely donated money to a political party and claimed a tax deduction, you have nothing to worry about.
Read below to know what exactly the warning is about and what precautions you should take to safeguard yourself.
New SMS campaign by the Income Tax Department to warn taxpayers about political donations claim
Several chartered accountants have confirmed to ET Wealth Online about their clients receiving a warning intimation SMS saying to verify their 80GGC political party donation deduction claim. Do note there is nothing to panic if you have made a genuine deduction claim for a registered political party. If you see the SMS sent by the tax department, then the message clearly says you need to file ITR-U (updated ITR) on or before March 31, 2025.
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ITR-U needs to be filed by those taxpayers who need to report any missing or underreported income. The deadline to file revised or belated ITR for FY 2022-23 or 2023-24 without any penalty has already passed. To file ITR-U taxpayers need to pay either 25% of the unreported income or 50%. The percentage (25/50) depends on the time when this ITR-U is filed i.e. after up to one year it is 25% and between one year and two years it is 50% from the end of the relevant assessment year to update the ITR.
Chartered Accountant Himank Singla, partner, SBHS & Associates say, “It seems that the Income Tax Department has ramped up its compliance checks on once again on political party donation related deduction claims made under Section 80GGC/ 80GGB, targeting deductions for contributions to political parties and electoral trusts. Taxpayers claiming these deductions for Assessment Years (AY) 2022-23, 2023-24, and 2024-25 are now under massive scrutiny, with the Department issuing notices requiring verification of the claims and necessary documentation.”
Income tax warning SMSSource: SBHS & AssociatesChartered Accountant Kushal Soni says, the Income Tax Department is continuously checking data for those filers where Section 80GGC (donation to political party) deductions were claimed.
“Recently, the department issued alert messages for filing of updated returns for AY 22-23 to those filers where deduction of Section 80GGC was claimed. To speed up the assessment and recovery assessment in cases for AY 2022-23 were opened in which deduction to political parties was disallowed in assessment orders and penalty of 200% for misreporting of income under Section 270A were also levied,” says Soni.
The Income tax department will impose up to 200% penalty if you are caught claiming bogus deductions for political donations
Chartered Accountants with whom we spoke confirmed that some of their clients who claimed such bogus deductions in the recent past and did not file ITR-U to make the necessary corrections have now been caught.These taxpayers who were caught claiming bogus deductions for political party donations have been imposed a 200% penalty on the tax amount which escaped assessment and in one case the matter is now being heard before CIT (Appeals). Given below is a summary of two situations of taxpayers who claimed bogus deductions for political donations.
Case 1: Scrutiny assessment case pending before CIT(A) due to wrongful claim of political donation
Chartered Accountant Prakash Hegde, says, “A taxpayer who had a Salary Income of around Rs 40 lakh for the financial year 2021-22 (AY 2022-23) had claimed a deduction for donation to a political party (under section 80 GGC) amounting to Rs 15 lakh and donation to charitable institutions (under section 80G) amounting to Rs 7.5 lakh in his income tax return that was filed in June 2022. Due to these claims, he was eligible for a refund and accordingly, he received the refund from CPC.In June 2023, his income tax return (ITR) was selected for complete scrutiny under CASS with reasons - “Deduction from Total Income (Chapter VI-A) (Non-business ITR)” under the Faceless Assessment Scheme. During the course of the assessment, the taxpayer submitted a revised computation withdrawing the claim of political donation made in the income tax return and paid tax payable along with interest.
In the assessment order, the income tax officer made many other additions and clerical errors also. Because of this, the individual had to file an appeal before the Commissioner of Income Tax (Appeals) and also a rectification application before the income tax office.
After concluding the assessment, the income tax officer has initiated the penalty proceedings and the same is in abeyance as the appeal is pending before the Commissioner of Income Tax (Appeals).
Case 2: 200% penalty paid for claiming bogus political donations; case now closed
A chartered accountant who wishes to remain anonymous said, “2 clients got assessment orders imposing the 200% penalty for claiming bogus deductions for political donations last month and 2 clients got the SMS highlighted in this article this morning.”CA Kushal Soni, says, “We checked our records, we have cases for AY 19-20 and AY 22-23 where updated ITR (ITR-U) were not filed then political party donations were disallowed in assessment orders. Penalty of 200% also levied for misreporting of income in such orders.”
Chartered Accountant Abhishek Soni, co-founder, Tax2Win says, “In the past financial years, we have seen the income tax department catching taxpayers claiming bogus political donation claims. Our advice to our and other’s clients would be to stay away from such activities and only claim genuine donations and not such bogus donations.”
Mihir Tanna, associate director, S.K Patodia LLP recalled a case where the income tax assessment department completed income tax assessment on the issue claiming bogus donations to political parties in ITR filed up to FY 2019-20 (AY 2020-21). “In the assessment order, donation was disallowed, and they initiated a 200% penalty.”
What precautionary measures to take if you have made any political donation
Barnala, Punjab based Chartered Accountant Nikhil Goyal from Nikhil Kumar & Co says, to substantiate claims under Section 80GGC, the following documents must be maintained:Donation Receipt: Issued by the recipient political party or electoral trust, including:Name of the party/trustPAN of the recipientMode and amount of donationDate of donationProof of Payment:Bank statements reflecting the transactionCopies of cheques or UPI confirmations, where applicableParty Registration Proof: The political party must be registered under Section 29A of the Representation of the People Act, 1951. Ensure the party or trust is a legitimate entity.Singla says, “Taxpayers receiving notices are advised to verify the accuracy of the deduction claimed in their Income Tax Returns (ITRs) and ensure proper documentation, including receipts and proof of payment. If you have even an iota of doubt regarding wrongful claim of deduction, please file an Updated ITR under Section 139(8A) by the deadline of March 31, 2025 - as indicated in the alert."
Singla says: "Failure to respond appropriately may invite assessment proceedings under Section 148 for escapement of income, penal consequences under Section 270A for underreporting of income, or even prosecution under Section 276C for tax evasion.”
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This story originally appeared on: India Times - Author:Faqs of Insurances
