Nationwide Crackdown on Bogus Deduction and Exemption Claims
Income Tax Department Launches Nationwide Crackdown on Bogus Deduction and Exemption Claims
The Income Tax Department has launched a large-scale verification drive across multiple cities in India to curb the growing menace of fraudulent claims of deductions and exemptions in Income Tax Returns (ITRs). The operation, initiated on 14th July 2025, targets individuals and entities—including certain ITR preparers and professional intermediaries—suspected of facilitating large-scale tax evasion.
This action follows in-depth data analysis revealing widespread misuse of provisions under the Income-tax Act, 1961. Investigations have uncovered organized rackets operated by return preparers who filed ITRs with fictitious deductions, false exemptions, and even fabricated TDS returns to secure inflated refunds.
The Department used a combination of third-party financial data, ground intelligence, and advanced artificial intelligence tools to identify suspicious patterns. Recent search and seizure operations in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh have yielded strong evidence of such fraudulent activities.
Rampant Misuse Detected in Multiple Sections
Preliminary analysis points to abuse of deduction and exemption provisions under sections like 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB. Many of these claims lacked valid documentation or justification. Those implicated include employees of MNCs, PSUs, government departments, educational institutions, and startups.
Fraudsters often lure taxpayers by promising large refunds in exchange for commissions. Notably, some ITR preparers use temporary email addresses for filing bulk returns and later abandon them, resulting in taxpayers missing crucial notices and communications from the Department.
Voluntary Compliance Encouraged
In alignment with its principle of ‘Trust Taxpayers First’, the Income Tax Department has proactively encouraged voluntary compliance. Over the past year, the Department has issued SMS and email advisories, urging suspected individuals to revise their returns. Physical outreach sessions have also been conducted across various locations.
As a result, approximately 40,000 taxpayers have revised their ITRs over the last four months, voluntarily withdrawing false claims worth ₹1,045 crore. However, a significant number remain non-compliant, possibly due to ongoing influence from key operatives behind these fraudulent schemes.
Stringent Action Ahead
The Department is now preparing to initiate strict enforcement measures, including penalties and prosecution against those continuing to make bogus claims. The ongoing verification at over 150 premises is expected to uncover digital evidence and help dismantle these networks of tax evasion.
Advisory to Taxpayers
Taxpayers are once again urged to file their ITRs with accurate income details and ensure proper communication details are furnished. They are strongly advised to avoid relying on unauthorized agents or intermediaries promising undue refunds.
Costly ITR Mistakes to Avoid in 2025 (Save Money):
https://www.youtube.com/shorts/xeTgjvfEt6o
Also Read: New Income-tax Bill 2025 Navigator
Also Read:
- Recommendations of the 55th Meeting of the GST Council
- Changes in GST and Income Tax during the Financial Year 2024-25
- TDS and TCS provisions applicable from April 1, 2025
- Rationalizing TDS: A Deep Dive into Budget 2025’s Proposals
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