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What is Income Tax Raid?

The Income Tax Department of India (ITD) is the apex executive agency responsible for the collection of direct taxes. It functions under the Department of Revenue of the Ministry of Finance and is headed by the Central Board of Direct Taxes (CBDT). The primary function of ITD is to collect income tax and enforce various direct tax laws such as Benami Transactions (Prohibition Act) Act, 1988 and the Black Money Act, 2015.

Combating tax avoidance and tax evasion is one of the key practices conducted by the ITD on a regular basis. The official search operation undertaken by the ITD is termed as an income tax raid. An income tax raid is the most effective method to curb and seize illegal wealth/black money hoarded by an individual or company.

Purpose of Income Tax Raid

The purpose of an income tax raid is to seize and curb illegal wealth/black money. Black money or unaccounted money refers to illegal income on which taxes have not been paid. It also includes income hoarded illegally or concealed from tax authorities. Therefore, it is important that one does not accumulate any amount of black money. If you possess black money, the chances of an income tax raid are quite high at your residence/office.

Powers of tax authorities during a raid

An income tax raid is generally conducted by a team of income tax officers accompanied by the police. The officers are bestowed with the following powers:

  1. Search and Seizure - Any building or place where unaccounted money is kept or stored. This can include books of account, financial documents, money, bullion, jewelry or other valuable article or thing.
  2. Break bank locker, safes and other systems, if required.
  3. Personal investigation of an individual who is a listed suspect or primarily accused.
  4. Seize all illegal and unaccounted assets and money.
  5. Create an inventory of valuables seized/found during the raid.
  6. Place marks of identification/make copies of books, accounts and other relevant documents.

The following assets cannot be seized by the income tax officials:

  1. Stocks of a business
  2. Assets/cash disclosed to the ITD.
  3. Assets declared in books of account
  4. Cash which is duly explained.
  5. Jewelry provided in wealth tax return.
  6. Gold - Up to 500 grams for each married lady, 250 grams for each unmarried woman and 100 grams for each male member.

Duties of a person during a tax raid

An individual has the following duties during an income tax raid:

  1. Allow free/unhindered access into the premises.
  2. Identify all receptacles containing assets, books of account, documents and provide details regarding the same to the authorised tax officer.
  3. Identify/explain the ownership of assets, books of account and documents.
  4. Deny access to any unauthorized person into the premises.
  5. Identify every individual in the premises and explain their relationship to the person being searched.
  6. Not to remove any asset from its place without notice of the authorized officer.
  7. Answer all queries and interrogations truthfully. He/she should be legally bound by an oath or affirmation to state the truth.
  8. Prevent any third party from interfering in the raid.
  9. Affix their official signature on the recorded statement, inventories and panchanama.
  10. Ensure peace is maintained during the entire search process.

Duties of a person after a tax raid

An individual has the following duties after an income tax raid:

  1. A suspect/accused has the right to make copies of the documents seized by the income tax officer. The copies have to be made in the presence of an income tax officer.
  1. An individual can file a petition before the High Court in case he/she feels that the raid conducted by the ITD was unlawful/unfair. They can also challenge a raid and appeal before the commissioner of Income Tax (Appeal).

How can one prevent an Income Tax Raid?

An individual can lawfully avoid an income tax raid by being compliant with the income tax authorities/responding to the summons and notices sent by the ITD.

Frequently Asked Questions

Is e-Verification of ITR mandatory?

After the Income Tax Returns have been filed, the e-verification process is mandatory for the IT Department to start processing your returns.

How do I link my Aadhaar Card with ITR?

Follow the below steps to link your Aadhaar Card number with ITR:

  • Go to the official website of e-filing Income Tax Returns and login with your credentials.
  • Upload your ITR.
  • Click on the option ‘I would like to generate Aadhaar OTP to e-Verify my return’ from those displayed on the screen.
  • An OTP (One Time Password) will be generated and forwarded to your registered mobile number.
  • Enter this OTP and then click on the ‘Submit’ button.
  • A confirmation notification will be displayed on your screen and also sent to your registered email ID.

Can I e-verify my income tax returns with Aadhaar Card without having linked my Aadhaar Card number with ITR?

No. If you haven’t linked your Aadhaar Card number to PAN Card, you will have to do that first before being able to e-verify your returns with your Aadhaar Card number.

My OTP has been generated on my mobile number while I was linking my Aadhaar Card with e-verification of PAN. But the OTP did not work. Why did that happen?

There may be two reasons why the OTP did not work:

  • You may not have entered the OTP correctly.
  • The OTP stays valid for 10 minutes. Entering it after this timeframe does not work.

Can income tax returns be verified online and offline?

Income Tax Returns can be verified either online or offline. ITR filed online cannot be verified offline.

What are the options for e-Verification of ITR?

E-verification of Income Tax Returns can be done through any one of these three ways:

  • Aadhaar OTP
  • Net Banking
  • Through bank account or demat account

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