NEW DELHI: British insurer Aviva said on Saturday its India unit is "actively engaging" with local authorities in connection with alleged tax evasion practices.

Reuters reported on Friday that an Indian tax agency has found that Aviva India breached local regulations capping commissions to sales agents with a system of fake invoices and clandestine cash payments between 2017 and 2023.

Aviva's India business paid about $26 million to entities who purportedly provided marketing and training services, but they did not perform any work and were actually a front for channeling funds to Aviva's agents, the tax agency said in a Aug. 3 notice reviewed by Reuters.

The fake invoices were alleged to have been used by Aviva to claim tax credits and evade $5.2 million in taxes in India. The company faces as much as $11 million in penalties, which is roughly its 2023 profit from selling life insurance in the country.

In a statement on Saturday, a UK-based spokesperson for Aviva referred to the matter as "an industry wide issue", adding its Indian joint venture was "actively engaging with the relevant authorities".

Aviva holds 74% in its India joint venture with Dabur Invest Corp, a prominent local firm.

The case is part of a broader investigation into over a dozen Indian insurers for alleged evasion of $610 million in unpaid taxes, interest and penalties.

Aviva said it faces "a small potential tax claim" and "there has been no adverse ruling or penalty against Aviva". (Reporting by Aditya Kalra; Editing by Mike Harrison)