The Income Tax Department today launched a major verification drive across multiple locations in India, targeting individuals and entities involved in fraudulent claims of deductions and exemptions in Income Tax Returns (ITRs). This action stems from a detailed investigation into the misuse of tax provisions under the Income-tax Act, 1961, often orchestrated with the help of professional intermediaries.
The department has uncovered organized rackets operated by certain ITR preparers and intermediaries who have been submitting false returns with fictitious deductions and exemptions. These schemes exploit beneficial provisions and, in some cases, involve the filing of fraudulent TDS returns to claim inflated refunds.
To identify such irregularities, the IT Department has used a combination of advanced artificial intelligence tools, financial data from third-party sources, and on-ground intelligence. These efforts have been bolstered by recent search and seizure operations in states including Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh. In these regions, concrete evidence was found indicating the involvement of individuals and groups in fraudulent tax practices.
Misuse has been noted particularly under sections 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB. Exemptions have been claimed without valid documentation or eligibility. Those involved include employees from MNCs, PSUs, government departments, educational institutions, and private entrepreneurs. These taxpayers are often misled by intermediaries promising inflated refunds in exchange for a commission.
Despite India’s fully digital tax filing system, communication gaps persist. Many intermediaries create temporary email accounts to file bulk returns, which are abandoned afterward, resulting in important IT Department notices going unread.
In line with its philosophy of ‘Trust Taxpayers First’, the department has emphasized voluntary compliance. Over the past year, it has issued advisories via SMS and email and conducted physical outreach programs to encourage taxpayers to revise incorrect filings. These efforts have yielded significant results—nearly 40,000 taxpayers have updated their returns in the past four months, voluntarily withdrawing false claims worth ₹1,045 crore.
However, a large number of non-compliant taxpayers remain, often influenced by the masterminds behind these fraud networks. The IT Department has now made it clear that strict action will be taken, including penalties and prosecution, against those continuing to submit fraudulent claims.
Ongoing verification operations across 150 locations are expected to uncover crucial evidence, including digital records, that will aid in dismantling these illegal networks and holding offenders accountable.
Taxpayers are once again advised to file accurate income details, provide valid contact information, and avoid falling prey to unauthorized agents promising undue refunds.
