Aviva India, the local arm of the British insurance giant, has been hit with a $7.5 million penalty after tax authorities uncovered fraudulent tax evasion practices. According to a February 5 tax order reviewed by Reuters, Aviva India used fake invoices and shell vendors to avoid paying taxes over several years.
Authorities found that between 2017 and 2023, the company funneled approximately $26 million to vendors that falsely claimed to provide marketing services. In reality, these vendors were used as conduits to channel illegal commissions to Aviva’s agents, bypassing regulatory limits on payouts. Through this scheme, Aviva fraudulently claimed tax credits and evaded $5.2 million in taxes.
Tax Evasion and Penalty Imposed
Following an investigation, Joint Tax Commissioner Aditya Singh Yadav determined that Aviva had deliberately engaged in tax evasion, estimating the unpaid taxes at 326 million rupees ($3.8 million). Authorities imposed a 100% penalty, effectively doubling the financial burden on Aviva to 653 million rupees ($7.5 million). The tax order described the vendors as “puppets” in Aviva’s scheme to unlawfully claim tax credits.
Aviva India Responds
In response to the ruling, Aviva India stated that it plans to appeal the decision, asserting that the order will not impact its ongoing operations. The company operates in India as a joint venture with Dabur Invest Corp., which owns a 26% stake following Aviva’s increased holding from 49% to 74% in 2022. Dabur has yet to issue a statement regarding the matter.
Financial Impact
Despite being one of India’s leading insurance firms, Aviva India reported a profit after tax of just $10 million for the 2023-24 financial year, making the fine a significant financial setback. The company’s legal battle to overturn the ruling will likely be closely watched, as it could have broader implications for compliance standards within India’s insurance sector.
Regulatory Crackdown in India
The case against Aviva India is part of India’s broader crackdown on tax evasion and financial misconduct. The authorities have increasingly scrutinized foreign firms operating in India, ensuring compliance with tax regulations. Aviva’s legal challenge will now determine whether the company can avoid full financial liability or if it will have to bear the consequences of the tax department’s findings.
