The Central Board of Direct Taxes (CBDT) has intensified its crackdown on fraudulent tax deduction claims by deploying advanced data analytics to identify suspicious patterns in income tax filings. The move comes amid the detection of widespread misuse of donation-related deductions, particularly those claimed for contributions made to certain political parties and charitable institutions.
According to the CBDT, recent enforcement actions have uncovered the role of multiple intermediaries who allegedly facilitated the filing of income tax returns containing bogus deductions and exemptions under the Income Tax Act, 1961. These intermediaries are suspected to have operated organised networks of agents across the country, offering inflated or false deduction claims to taxpayers in exchange for commissions.
Bogus Donations Under the Scanner
The tax authority found that a significant portion of fraudulent claims related to donations made to Registered Unrecognised Political Parties (RUPPs) and certain charitable trusts. In many cases, these entities were found to be non-operational, non-compliant with filing requirements, or not functioning from their registered addresses. Several were also found to have no verifiable political or charitable activity.
Investigations revealed that such entities were allegedly being used as conduits for routing unaccounted funds, facilitating hawala transactions, enabling cross-border remittances, and issuing fake donation receipts. Follow-up search operations conducted by the Department against some RUPPs and trusts yielded incriminating evidence of bogus donations claimed by individuals and fraudulent Corporate Social Responsibility (CSR) expenditure claimed by companies.
Data-Driven Detection of High-Risk Claims
The CBDT has stated that it has significantly strengthened its data-driven systems to enable early identification of high-risk taxpayer behaviour. One key risk pattern flagged through analytics relates to deductions claimed under Sections 80G and 80GGC of the Income Tax Act, which provide tax benefits for donations to charitable institutions and political parties.
Analysis of return data suggested that a large number of taxpayers may have claimed deductions for donations made to suspicious or unverifiable entities, or failed to furnish adequate information to establish the genuineness of such donations. Based on these insights, the Department initiated a targeted outreach exercise.
NUDGE Campaign Encourages Voluntary Compliance
As part of its taxpayer-friendly approach, the CBDT has launched a focused “NUDGE” campaign aimed at encouraging voluntary correction of incorrect claims. Under this initiative, taxpayers identified through data analytics are being informed and advised to review their returns and withdraw any ineligible deductions.
SMS alerts and email advisories have been issued to such taxpayers from December 12, 2025, on their registered mobile numbers and email addresses. The communication provides taxpayers an opportunity to revise their returns for the current assessment year 2025–26 or to file updated returns for previous years, thereby avoiding harsher enforcement actions at a later stage.
The Department noted that a substantial number of taxpayers have already responded positively to the initiative by revising their returns or filing updated income tax returns for past assessment years.
Advisory to Taxpayers
The CBDT has urged taxpayers to ensure that their contact details, including mobile numbers and email addresses, are correctly updated in departmental records to avoid missing important communications. It also reiterated that detailed guidance on eligible deductions and the process for filing updated returns is available on the official income tax portal.
By combining technology-driven scrutiny with a compliance-first outreach strategy, the CBDT aims to curb tax evasion through bogus claims while giving taxpayers a fair opportunity to correct errors and align with the law voluntarily.
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