The Income Tax Department has launched a nationwide crackdown on fraudulent deduction claims, conducting raids at over 200 premises suspected of misusing tax exemptions under the old tax regime. The operation, focused on identifying fake and inflated deductions, has uncovered widespread malpractice among individual taxpayers.
Commonly Misused Deductions
According to officials, several provisions of the Income Tax Act are being misused. Key areas of concern include:
- Political Donations (Section 80GGC): Fake payments were made to unregistered or shady political entities to claim 100 percent deduction without proper receipts.
- School/College Fees (Section 80C): False claims were filed for tuition fees of relatives, leading to mismatches in PAN and lack of supporting documentation.
- Medical Bills (Section 80D/80DDB): Taxpayers submitted inflated or fictitious bills. The department has initiated cross-verification with hospitals.
- Donations to Trusts (Section 80G): Fake donation receipts from non-compliant NGOs were used. The government is now tracking unique identification numbers (UINs) and payment modes.
- Preventive Health Check-ups (Section 80D): Cash bills without diagnostic proof were submitted, exceeding the ₹5,000 limit for genuine expenses.
- Interest on Education Loan (Section 80E): Claims were made without availing actual education loans, despite lender certification being mandatory.
- Rent Deduction (Section 10(13A)/80GG): Deductions were claimed without furnishing the landlord’s PAN or a valid rent agreement. For claims above ₹1 lakh, PAN and Aadhaar matching is now being enforced.
Other Red Flags
- Self-Employed Reimbursements: Dummy reimbursements for expenses such as fuel and phone bills are under scrutiny. All such claims are being audited.
- Old Regime Misuse: A pattern of mixing genuine and fabricated deductions has emerged among old regime taxpayers. Filing a paperless return does not exempt the taxpayer from maintaining documentary proof.
- Revised Return Advisory: Claims flagged as non-compliant under the NUDGE initiative must be corrected through revised returns before scrutiny begins.
Advisory for Taxpayers
The Income Tax Department has emphasized the need for accurate and supported filings. With advanced digital verification tools, unverifiable deductions are increasingly being detected. Taxpayers are advised to ensure all claims are legitimate and backed by proper documentation, particularly under the old regime.
Failure to comply may result in audit scrutiny, penalties, and legal consequences under applicable provisions of the Income Tax Act.
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