Xiaomi, Oppo face BIG Income Tax fine: Rs. 1000 crore for violating law

The New Year celebration of 2022 may be dampened for Xiaomi and Oppo; two of the most popular smartphone manufacturers in India. According to the Income Tax Department, both these tech companies have violated the tax laws and are liable to pay a fine of ₹1,000 crores.

The IT department says that two major tech companies have inflated their expenses in an effort to lower their taxable profits of over ₹1,400 crore. While the Income Tax department hasn't revealed the names, industry insiders say these are Oppo and Xiaomi. The tax department had conducted a raid in 11 states, which included Tamil Nadu, Karnataka , Gujarat, Rajasthan, Delhi, and a few other states.

Xiaomi, Oppo face Income Tax fines

“The search revealed that two major companies have made remittance in the nature of royalty, to and on behalf of its group companies located abroad, which aggregates to over ₹5,500 crore. The claim of such expenses does not seem to be appropriate in light of the facts and evidence gathered during the search,” said the Income Tax department.

"These companies had not complied with the regulatory mandate prescribed under the Income-Tax Act, 1961 for disclosure of transactions with associated enterprises. Such lapse makes them liable for penal action under the Income-Tax Act, 1961, the quantum of which could be in the range of more than ₹1,000 crore," the Income Tax department’s statement added.

The Income Tax department also raised questions about the source of foreign funds received by these companies. They said that the raids has “brought to fore another modus operandi whereby foreign funds have been introduced in the books of the Indian company.”

“But it transpires that the source from which such funds have been received are of doubtful nature, purportedly with no creditworthiness of the lender,” the statement added.

Neither Xiaomi nor Oppo have released a media statement regarding the situation. Additionally, both the companies have their launch events planned for the first week of January. Xiaomi is launching its Xiaomi 11i series smartphones on January 6 while Oppo is announcing its Enco M32 neckband wireless earphones on January 5.