A host of insurance companies and their intermediaries have come under pressure for allegedly evading around Rs 30,000 crore in income tax since July 1, 2017, when the Goods and Services Tax (GST) was introduced, by underreporting their incomes and presenting false expenditures.
To recover the dues, the income tax (I-T) department has begun issuing demand notices to these entities, a newspaper report has said, citing an internal assessment by tax authorities. Additionally, the total dues may escalate with the imposition of interest and penalties, the Economic Times reported. The development highlights the issue of tax evasion in the insurance sector and efforts to address it through legal actions and recovery measures.
Moneycontrol could not verify the report independently.
“We are sending demand notices along with penalty and interest to companies separately and they will get the mandated time to respond to them or contest them,” a senior official told the financial daily.
The assessment officer will determine the specific amounts for interest and penalties in this case.
The issue came to light when the I-T department, in collaboration with the Directorate General of GST Intelligence (DGGI), initiated an investigation last year. It focussed on insurance companies that were allegedly evading regulations on commissions and were found to be making payments beyond the permissible limits to agents and intermediaries, often through invoices that were later identified as fake, the report said. The ongoing investigation aims to address these malpractices within the insurance sector.
Also Read: I-T dept conducts searches on Lux Industries premises in Kolkata
The tax department investigated the potential loss of income tax resulting from inflated or exaggerated expenditures reported by insurance companies and their intermediaries.
The publication quoted another official as saying that in addition to inflated expenditures, there were instances of fabricated Corporate Social Responsibility (CSR) spending, involving falsely documenting CSR events that never occurred and significantly inflating advertising and event bills. The department has obtained transaction details related to these activities, suggesting potential instances of tax evasion and false reporting.
The initial probe focused on 30 insurance companies and 68 tax agents and intermediaries. Subsequently, it was expanded to include many banks that had acted as insurance intermediaries nationwide.
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