Authorities uncover tax evasion scheme involving fraudulent invoices and illegal commission payments. Aviva India plans to appeal the decision.
Aviva India Ordered to Pay Back Taxes and Penalties
British insurer Aviva’s India unit has been ordered to pay $7.5 million (653 million rupees) in back taxes and penalties after authorities found it engaged in fraudulent practices to evade taxes. The ruling, issued on February 5, follows an investigation into the company’s financial transactions between 2017 and 2023.
The probe revealed that Aviva India paid approximately $26 million to vendors supposedly providing marketing services. However, authorities determined that these vendors were fake entities, used to funnel illegal commissions to Aviva’s agents beyond regulatory limits.
By creating fake invoices and using cash transactions, Aviva India falsely claimed tax credits and evaded $5.2 million in taxes.
Tax Authorities Uncover Fraudulent Practices
After reviewing Aviva’s defence, Joint Tax Commissioner Aditya Singh Yadav ruled that the company had deliberately evaded taxes amounting to $3.8 million (326 million rupees). As a result, the company was ordered to pay:
- $3.8 million in back taxes
- A 100% penalty, bringing the total amount to $7.5 million
The official ruling stated that the vendors involved were mere “puppets” used by Aviva India to illegally claim tax credits.
Aviva India Plans to Appeal the Ruling
In response to the decision, Aviva India announced that it would challenge the ruling through an appeal. The company also assured that the penalty would not impact its operations.
Aviva India operates as a joint venture with Dabur Invest Corp., which holds a 26% stake in the company. Aviva increased its ownership from 49% to 74% in 2022. As of now, Dabur has not commented on the issue.
Financial Impact on Aviva India
Despite the penalty, Aviva India remains operationally stable. The company reported a profit after tax of $10 million in the 2023-24 financial year.
Regulatory Scrutiny on Insurance Companies in India
This case highlights growing regulatory scrutiny over financial misreporting and tax evasion in India’s insurance sector. Authorities are increasingly focused on:
- Preventing fraudulent commission payments
- Ensuring compliance with tax laws
- Tightening oversight on financial transactions within the industry
With Aviva India set to appeal the ruling, the case may set a precedent for future regulatory actions in the insurance sector.
