Income Tax Raid: IT Department Cracks Down on Fake Tax Deduction Claims of over Rs.1,000 crore

The Income Tax Department has launched a large-scale verification drive across several parts of the country to curb the growing trend of false tax deduction and exemption claims in Income Tax Returns (ITRs). This action comes after in-depth investigations revealed organised networks of tax intermediaries involved in filing bogus returns.

Widespread Misuse of Tax Benefits

According to officials, many individuals have been wrongly claiming deductions under various sections of the Income-tax Act, 1961. These false claims were mostly made with the help of some professional tax return preparers and agents who encouraged taxpayers to claim inflated refunds in exchange for a small commission. The sections that were most commonly misused include:

• Section 10(13A) – House Rent Allowance (HRA)
• Section 80GGC – Donations to political parties
• Section 80E – Interest on education loan
• Section 80D – Health insurance premiums
• Section 80EE & 80EEB – Interest on home and electric vehicle loans
• Section 80G & 80GGA – Charitable and scientific donations
• Section 80DDB – Treatment for serious illnesses

How the Fraud Was Detected by Income Tax

The Income Tax Department used a mix of advanced technology, including artificial intelligence, third-party financial data, and field intelligence to identify unusual patterns in tax filings. These insights were confirmed by recent search and seizure operations in states like Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh.

In many cases, it was found that temporary email IDs were created by these intermediaries just for filing ITRs. Once the returns were filed, the email IDs were abandoned, causing official tax notices to go unread by taxpayers.

Who Is Involved in Income Tax Fraud?

This malpractice was not limited to a particular sector. Employees from multinational companies (MNCs), public sector undertakings (PSUs), government offices, academic institutions, and even small business owners were found to be part of these false claims, knowingly or unknowingly.

Income Tax Department’s Outreach Efforts

Before taking strict action, the Income Tax Department had already initiated a massive outreach campaign. Over the last year, it sent emails, SMS alerts, and conducted physical workshops at various locations to inform people about the risks of filing fake claims.

As a result of this campaign, over 40,000 taxpayers have revised their ITRs in the last four months. They voluntarily withdrew false claims amounting to ₹1,045 crore.

Now, the department has begun physical verification at 150 locations across India to collect more evidence. This includes checking both digital and paper records.

Strict action, including penalties and prosecution, will be taken against those who continue to make false claims or help others do so.

Income Tax Department Message for Taxpayers

The Income Tax Department has advised all taxpayers to:

• File correct income details
• Avoid using unauthorised agents or preparers
• Provide valid contact details like email and phone number
• Do not fall for promises of high refunds in exchange for commissions

Filing wrong claims is illegal and may lead to fines and even legal action.