Fake ITR Claims Alert: Govt Sends SMS/Email, Jail Possible if Not Corrected

The Income Tax Department (ITD) has uncovered a network of agents filing fake ITR claims for taxpayers in exchange for commission. Most fraudulent claims involved donations to registered unrecognized political parties (RUPP) and certain charitable organizations, leading to illegal tax refunds.

What’s Happening?

Thousands of ITRs are currently under scrutiny due to incorrect or inflated deductions. Agents were submitting returns showing false deductions to reduce tax liability or claim undeserved refunds.

• A network of brokers across India was involved, taking commissions for filing such returns.

• The fake claims primarily included donations to RUPPs or some charitable institutions.

The government is now cracking down on such malpractice using advanced analytics, third-party verification, and strict penalties.

How Fake Claims Are Detected

The IT Department uses:

1. Advanced Data Analytics & AI-based risk profiling to identify unusual deduction patterns.

2. Third-party verification with:

   • Bank records

   • Trust filings

   • AIS or Form 26AS

   • PAN-linked financial databases

Where discrepancies are found, searches and surveys are conducted under Sections 132 & 133A of the Income Tax Act.

Penalties for Fake Claims

• False claims under Sections 80G or 80GGC are disallowed, and extra tax is levied.

• Interest and penalty under Section 270A can go up to 200% of the under-reported tax.

• Amounts treated as unexplained money under Section 69A may attract 78% tax plus 10% additional penalty under Section 271AAC.

• In serious deliberate tax evasion cases, criminal prosecution can lead to jail.

Experts warn that trusts or political parties involved may face delays or denial in registration/renewal under Sections 12AB and 80G, which may impact donor confidence and funding. Banks and NBFCs may also restrict loans to associated donors per RBI rules.

Opportunity to Correct

Under the Nudge Campaign, since December 12, 2025, selected taxpayers have received SMS and emails on their registered numbers and email IDs. The communication advises taxpayers to:

• Check their ITR for incorrect claims

• Rectify any false deductions to avoid penalties or legal action

Bottom Line: If you’ve claimed wrong deductions, correct them immediately. Ignoring the notice can lead to hefty penalties, interest, and even imprisonment. Compliance now saves trouble later.