Income Tax Alert: The Department of Income Tax has launched a large-scale drive against bogus claims for deductions and exemptions in Income Tax Returns, against organised rackets, false returns, and abuse of favourable provisions.
The Income Tax Department is also carrying out a large-scale tax return verification after a detailed analysis that identified abuse of several deductions, and using sophisticated AI tools and third-party information to detect suspicious behavior and collusion with intermediaries.
This mass verification is preceded by meticulous examination of abuse of advantageous provisions such as deductions u/s 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB, frequently in collusion with professional facilitators. Sophisticated artificial intelligence tools and third-party information are being employed to detect phantom patterns.
Income Tax Dept launches country-wide crackdown on bogus tax claims
The Income Tax Department started a nationwide verification drive at various locations in the country on 14th July 2025 against individuals and entities who are enabling fraudulent availing of deductions and exemptions under Income Tax Returns (ITRs).
This drive comes after a thorough analysis of the abuse of tax benefits under the Income-tax Act, 1961, in connivance with professional intermediaries.
Spurious TDS returns & undue refunds
Investigations have revealed organised rackets run by some ITR preparers and intermediaries, who have been submitting returns with fictitious deductions and exemptions.
Such fictitious claims involve misuse of beneficial provisions, to which some have even gone to the extent of submitting false TDS returns to falsely claim excess refunds.
Income Tax Dept uses AI to uncover fake claims
To detect suspicious patterns, the Department has utilized financial information obtained from third-party sources, grassroots intelligence, and sophisticated artificial intelligence means. These results are also supported by recent searches and seizures carried out in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh, where proof of fraudulent claims was found to have been utilized by many groups and organizations.
Tax Deduction Scam: Sections 80G, 80D & others misused
Misuse of deductions under sections 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB comes to the fore with vigour in analysis. Exemptions have been falsely claimed. MNC employees, PSU employees, government employees, educational institutions, and small entrepreneurs are found to be involved.
Taxpayers are tempted by such malpractices with guaranteed surreptitious large refunds against a commission. In spite of having a tax administration system fully e-enabled, poor communication has been found to be a major challenge in helping taxpayers.
71,000 crore bogus claims withdrawn
The practice has been noted where such ITR preparers provide temporary e-mail IDs for filing bulk returns that are subsequently discarded, leaving government notices unread.
In accordance with its philosophy of 'Trust Taxpayers First', the Department has stressed voluntary compliance.
The Department has, over the last year, conducted widespread outreach, in the form of SMS and email notifications, prompting suspected taxpayers to correct their returns and pay the appropriate tax. Physical outreach initiatives, both on- and off-campus, have also been implemented.
Consequently, around 40,000 taxpayers have revised their returns over the past four months, willingly withdrawing bogus claims totalling 71,045 crore. But numerous others remain non-compliant, perhaps at the behest of the masterminds of such evasion rackets.
The Department is now set to take firm action against continued bogus claims, including penalties and prosecution wherever applicable.
The ongoing verification exercise in 150 premises is expected to produce vital evidence, including electronic records, which will contribute towards dismantling the networks involved in these schemes and bringing accountability under the law. Additional investigations are in progress now.
Taxpayers once more are cautioned to submit accurate details of income and communication coordinates, and not be swayed by counseling from unauthorised agents or intermediaries guaranteeing excess refunds.
Also Read: India's net direct tax collection declined 1.34% in FY 2025-26 till July 10; refunds see 38% jump