CBDT cracks down on bogus ITR deductions, flags fake donation claims

The Central Board of Direct Taxes (CBDT), on Saturday, said that it has acted upon many intermediaries who were involved in filing income tax returns with bogus claims of deductions and exemptions under the Income Tax Act.

The exercise revealed that some intermediaries have established a network of their agents all over India for filing returns with incorrect claims on a commission basis, the board informed through an official release from the Ministry of Finance.

CBDT acts upon bogus claims

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"It was observed that huge amount of bogus claims have been made on account of donation to Registered Unrecognised Political Parties (RUPPs) or Charitable Institutions and reduced their tax obligations and have also claimed bogus refunds," the release read.

The tax authority has discovered widespread fraudulent donation claims made to political parties and institutions, mostly under Sections 80GGC and 80G of the Income Tax Act, 1961, which are now being examined closely by the department’s Tax Scanner system.

As per the CBDT, the probes uncovered that some third parties were paid to submit income tax returns with incorrect deduction and exemption claims. These third parties are said to have created a network of agents throughout the country who would prepare and submit fraudulent returns that resulted in taxpayers getting larger refunds and paying less tax.

The operation revealed that donations were being funnelled through Registered Unrecognised Political Parties (RUPPs) and a few charitable trusts that were either non-operational, non-filers, or just not doing any real political or charitable activities.

The authorities collected evidence during their raids that pointed to these organisations being used as middlemen for hawala transactions, cross-border remittances, and issuance of fake donation receipts.

The CBDT has executed follow-up operations on some of these RUPPs and trusts that led to the discovery of incriminating evidence with regard to bogus donations by individuals and fake corporate social responsibility (CSR) claims by companies.

Utilising state-of-the-art data analytics, the department has improved the mechanisms for early detection and subsequently flagged the suspicious deduction claims. One major risk pattern that has been indicated is that people who have claimed deductions but have not submitted enough information to prove that the recipient entities are real.

As a result of the detection drive, a large number of taxpayers have already revised their Income Tax Returns (ITRs) for the current Assessment Year 2025–26 and filed updated returns for previous years, the CBDT said.

CBDT's NUDGE campaign

To encourage voluntary compliance, the tax authority launched a targeted ‘NUDGE’ campaign, aimed at giving taxpayers an opportunity to correct their returns and withdraw incorrect claims, if any. As part of this initiative, SMS and email advisories are being sent to identified taxpayers from December 12, 2025, to their registered mobile numbers and email addresses.

The CBDT has advised taxpayers to ensure that their contact details are correctly updated in their filings so they do not miss any official communication from the department.