The Income-Tax Department has sent 8,000 notices to various individuals who made large donations to charitable trusts, The Economic Times (ET) reported. The notices have been sent because the donations made appear to be attempts to evade tax.
Government officials aware of the development were quoted in the report as saying that the data shows that donations made by these taxpayers was not consistent with their declared incomes and expenditures.
The people who have been served notices include salaried employees, self-employed individuals, and companies.
The government official said, “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.” He added, “Also, an exceptionally high amount was paid to tax professionals, even by a straight salaried person.”
The notices were sent during the last one month and were for the assessment years 2017-18 to 2020-21. IT department is likely to send more notices, the ET report said.
Notices were also sent to small businesses which donated to charitable trusts as their incomes and donations did not add up.
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The officials said that such donations are made out in a way that cash donation receipts are given to the individual and a commission is deducted, while the money is returned to the person.
The department is also looking into charitable trusts that facilitate such transactions. So far, there has not been any action on such trusts, however, there is a provision to cancel their tax exemption status if they are found to be involved in such illicit practices.
Elaborating on the matter, experts said that tax evasion using donations was possible in the past but strict complilance and data collection by the tax department makes evasion a lot more difficult. To this end, donations above Rs 2,000 have been disallowed.