The Income Tax Department has launched a nationwide drive to crack down on large-scale manipulation, where false claims of deductions have been identified and are currently under scruty. Tax authorities are leveraging multiple databases with the help of Artificial Intelligence to detect and investigate these discrepancies.
The Central Board of Direct Taxes (CBDT) states that while the primary focus is on deductions related to fake political donations, the exercise is a comprehensive one. It also covers others claim such as health insurance, medical expenses, House Rent Allowance (HRA), and interest on loans for housing, vehicles & education.
A wide range of taxpayers, including employees of private companies, public sector undertakings, government agencies, academic institutions, and even entrepreneurs are reported to have claimed deductions without proper justification.
Certain unrecognized parties allegedly accepted donations, kept a portion as commission, and returned the remaining amount to the donors, who then falsely claimed full deductions under Section 80GGC.
Tax officers have conducted raids at more than 200 locations, targeting both individuals and entities. This includes those allegedly assisting taxpayers in making such fraudulent deduction claims.
The Tax Authorities initially launched the “NUDGE” Campaign – a non-intrusive initiative aimed at guiding and enabling taxpayers using data-driven insights. As part of this campaign, taxpayers received SMS messages such as: “It is observed that you have claimed a deduction under section 80GGC of ₹100000 in your ITR for AY 2024-25. Please verify and rectify by filing ITR-U”. These messages were intended to prompt taxpayers to review and correct any incorrect claims made in their returns.
This led to “Around 40,000 taxpayers updating their returns in the last four months, voluntarily withdrawing false claims amounting to ₹1,045 crore”.
Since there have been thousands of cases where no rectification was carried out or no response was received, the Income Tax Department has treated this as non-cooperation and has now escalated monitoring and enforcement actions against repeat offenders.
Summons u/s 131A and other forms of communication, such as emails, are being sent to the concerned individuals and entities, requesting them to furnish detailed information regarding the deductions claimed. If satisfactory responses are not received, or if such communications go unanswered, the Income Tax Department may issue notices u/s 148 to reopen assessments potentially resulting in additional taxes and penalties.
Taxpayers receiving such SMS alerts, summons, or other communications are advised to verify the authenticity of the donations for which deductions u/s 80GGC have been claimed. If supporting documents such as receipts or bank payment proofs are not available, the best course of action would be to file an updated return and withdraw the claimed deductions. With the availability of advanced data analysis tools and the added support of AI, the Tax Department is expected to intensify data mining efforts. Almost all financial transactions are now being cross-checked, analyzed, and filtered to detect fake, false, or fraudulent claims. Ignoring alerts or communication from tax authorities can quickly escalate the matter, leading to penalties or legal notices. It is imperative for taxpayers to stay vigilant, ensure the authenticity of their claims, and respond promptly to avoid serious consequences.