Insurance companies made a mistake of Rs 30 thousand crores by showing fake expenses, allegations of tax evasion

Many big insurance companies of the country have come under the ambit of the ongoing Income Tax investigation regarding tax evasion. These insurance companies are accused of tax evasion worth thousands of crores. The Income Tax Department was keeping a close watch on these companies ever since they got wind of the irregularities. Which he has now disclosed in collaboration with DGGI.

The Income Tax Department has detected major irregularities in the insurance companies. The IT department was keeping a close watch on these companies ever since they got wind of the irregularities. After which many insurance companies were under investigation. This investigation was done for big insurance companies and many insurance businesses of the country. According to information received from the Income Tax Department, insurance companies and their intermediaries have allegedly evaded income tax of about Rs 30,000 crore since July 1, 2017 (since the introduction of GST) by suppressing income and showing fake expenses.

People with knowledge of the matter told The Economic Times that the department is preparing to send tax demand notices to these units to recover the dues. After which this amount may increase after interest and penalty are charged.

You will get so much time to answer

According to a news published in ET, the insurance companies to whom notices have been sent will be given enough time to reply and pay the penalty. There are allegations against these insurance companies that they collected commission from co-insurance companies on re-insurance premium, but did not pay tax. Although the officer did not reveal the name of any company, he said that the notices sent are worth around Rs 30,000 crore. The amount of the notice may increase if interest and penalty are added.

fake invoices

Last year, the Income Tax Department along with the Directorate General of GST Intelligence (DGGI) had initiated an investigation. In which it was revealed that some insurance companies were bypassing the rules on commission, paying more to agents and intermediaries than allowed. Such payments were made on the basis of challans which the officials said were fake. The Income Tax Department investigated the income tax loss due to alleged increased expenditure.

Another official also said that there were cases of fake CSR expenditure, in which events were shown that never happened and inflated advertisement and event bills were given. For which we have got all the transaction details. 30 insurance companies, 68 tax agents and intermediaries were involved in the initial investigation. Later, the scope of the investigation was expanded to include several banks that acted as insurance intermediaries across the country.

sword hanging over them too

In the case of the banks acting as intermediaries, the investigation found that the insurance companies paid the banks' costs, but that those payments were never recorded. This amounts to non-disclosure, which is a serious violation under IT laws, said another official. The DGGI was reportedly probing cases of insurers claiming input tax credit without underlying supply of goods and services, using fake invoices provided by middlemen. DGGI said that this led to GST evasion of Rs 3,500 crore. DGGI said that this was a joint investigation and an example of data sharing that we did together, which supported the investigation with data and evidence and such a huge irregularity was caught.