The IT department is also investigating independent tax professionals who may have assisted with these transactions.
According to officials, around 8,000 taxpayers who have made significant donations to charitable trusts are suspected of attempting tax evasion and have received notices from the income tax department.
Data analytics indicates that these taxpayers made donations that are not commensurate with their income and expenses, as per sources cited by Economic Times.
The income tax department has issued notices to individuals, including salaried and self-employed individuals, and companies who have made large donations to charitable trusts that are suspected of being used for tax evasion.
The IT department is also investigating independent tax professionals who may have assisted with these transactions.
“In all 8,000 odd cases, the donation was exactly the amount required to lower the tax slab or get a full exemption and was paid by cash,” a tax official said. “Also, an exceptionally high amount was paid to tax professionals, even by a straight salaried person.”
From mid-March to early April, notices were issued for the assessment years 2017-18 to 2020-21 to about 8,000 taxpayers suspected of tax evasion through large donations. The Income Tax Department may issue additional notices in the upcoming weeks.
According to officials, small businesses, in particular, were found to have made charitable contributions that were not in line with their income.
In these transactions, the taxpayers receive a donation receipt and cash contributions after a commission is deducted, helping them evade taxes.
The income tax department is also monitoring charitable trusts that are issuing fake bills to taxpayers. Although no action has been taken against them yet, they could lose their tax exemption status if found guilty of wrongdoing.
To encourage charitable giving, the Income Tax Act permits deductions from income for donations made to certain funds and charitable institutions under Section 80G. The amount of deduction allowed depends on the nature of the institution, with 50-100% of the contribution being eligible.
However, these donations are also subject to limits that are based on the donor’s income.
Source: https://www.livemint.com/news/india/charitable-trusts-under-scrutiny-as-income-tax-dept-sends-notice-over-donations-report-11681787373107.html
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