Fake Allowances = Real Tax: Salaried Employees May Penalize 200%

Mitali | Last updated: 26 August 2025

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Salaried employees often make costly errors on their tax returns, such as claiming unallowed allowances or misrepresenting salary income as professional receipts. These mistakes can lead to penalties of up to 200% of the tax due, in addition to the actual tax and interest. It's crucial to report income under the correct 'Salary' head and only claim allowances and expenses that are genuinely permitted and documented, especially under the new tax regime.

Salaried individuals often make two big mistakes in their Income Tax Returns: First is they claim wrong exemptions for unallowed allowances, and Second, is convert salary income into professional receipts under section 44ADA. Penalties for Income Misreporting Under-reporting income may result in a

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About the Author

Mitali

Finance Professional

I write about Income Tax, GST, TDS, RBI updates, government schemes, and personal finance in India. My focus is on simplifying complex tax and compliance topics into easy-to-understand guides that help readers stay updated with the latest financial rules, investment options, and regulatory changes.

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