In a sweeping enforcement move, the Income Tax Department has launched a large-scale verification operation across several states in India to tackle fraudulent claims of deductions and exemptions in Income Tax Returns (ITRs). The crackdown, initiated on 14th July 2025, is aimed at individuals and entities abusing tax provisions under the Income-tax Act, 1961, often in connivance with professional intermediaries.
Bogus Claims and False Refunds Under Scanner
The department’s probe has uncovered well-organized rackets involving ITR preparers and intermediaries, who have been allegedly submitting returns with fictitious deductions and exemptions to secure inflated refunds. Some even resorted to filing fake TDS returns to claim undue benefits.
Utilizing financial data from third-party sources, on-ground intelligence, and artificial intelligence tools, the Department has identified suspicious filing patterns. These findings were corroborated through recent search and seizure operations conducted in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh, where evidence of fraudulent schemes was found to be rampant.
Rampant Abuse of Key Sections of the Act
The misuse predominantly centers around deductions claimed under sections 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB. The Department notes that exemptions were often claimed without justification, implicating not just small-time filers but also employees of MNCs, PSUs, academic institutions, and entrepreneurs.
In many cases, taxpayers were lured into the scam with promises of inflated refunds in exchange for a commission. A critical challenge has been the ineffective communication resulting from the use of temporary email IDs created by intermediaries to file bulk returns—often leaving taxpayers unaware of official notices.
40,000 Voluntary Withdrawals Worth ₹1,045 Crore
Promoting its “Trust Taxpayers First” philosophy, the Department has actively nudged taxpayers toward voluntary compliance over the past year. Through SMS and email advisories, and on-ground outreach programs—including campus-based efforts—taxpayers were encouraged to revise incorrect returns.
These initiatives have yielded significant results: approximately 40,000 taxpayers have voluntarily corrected their filings in recent months, collectively withdrawing false claims worth ₹1,045 crore. However, the Department noted that many taxpayers continue to remain non-compliant, likely under the influence of tax fraud rackets.
Tough Measures Ahead: Penalties and Prosecution
The Department has committed to taking stern action against continuing fraudulent claims. This includes imposing penalties and pursuing prosecution wherever applicable. The ongoing verification across 150 premises is expected to uncover key digital records and documents, aiding in exposing and dismantling the networks behind these schemes.
Advisory to Taxpayers
In its concluding message, the Department strongly advised taxpayers to ensure accurate reporting of income and to maintain updated contact details in their ITR filings. Citizens were warned against relying on unauthorized agents or intermediaries promising undue refunds.
Further investigations are ongoing.
