Income Tax Department: Have you also engaged in this fraudulent activity? The Income Tax Department may take action...

The Income Tax Department has exposed intermediaries who were filing income tax returns with fraudulent deductions and exemptions. These intermediaries assisted taxpayers in illegally reducing their tax liability and claiming false refunds. The Income Tax Department has now given taxpayers who made such fraudulent claims an opportunity to rectify their mistakes. Failure to do so may result in action being taken against the taxpayers.

According to the Income Tax Department, investigations revealed that some intermediaries had established a network of agents across the country. These agents filed returns on commission, inflating deductions under the Income Tax Act or claiming fictitious deductions. The Income Tax Department stated that many of these false claims were related to donations made to Registered Unrecognized Political Parties (RUPPs) and certain charitable institutions.

Information shared on social media
The Income Tax Department shared this information in a post on the social media platform X. The post stated that it was observed that a large number of fraudulent claims were being made in the name of donations to Registered Unrecognized Political Parties (RUPPs) or charitable institutions. This resulted in reduced tax liabilities and false refunds being claimed.

The post further stated that evidence gathered through enforcement actions revealed that RUPPs, many of which were non-filers, non-operational, and had dubious addresses, and were not involved in any political activity, were being used to launder unaccounted, cross-border funds and issue fake donation receipts. The department conducted follow-up searches against some such RUPPs and trusts and gathered incriminating evidence regarding fraudulent donations made by individuals and fraudulent CSR (Corporate Social Responsibility) contributions made by companies. Deductions Claimed
The Central Board of Direct Taxes (CBDT) states that it has further strengthened its data analytics-based monitoring systems to identify suspicious claims at an early stage. A similar high-risk pattern has been flagged in cases where taxpayers have claimed deductions under Section 80GGC and Section 80G of the Income Tax Act, 1961.

Data analysis revealed that many taxpayers had either made donations to suspicious entities or were unable to provide sufficient information to establish the authenticity of the recipient organizations. In response, a large number of taxpayers have revised their returns for the current assessment year (AY 2025-26) and also filed updated returns for previous years, voluntarily withdrawing the incorrect claims.

'Nudge Campaign' Launched
Taking a step in the interest of taxpayers, the Income Tax Department has launched a 'Nudge' campaign. This allows taxpayers to correct their filings before any punitive action is taken. Under this initiative, identified taxpayers have been sent notifications via SMS and email since December 12, 2025.

These notifications encourage them to review their returns and update them if they have made any incorrect claims. According to the Income Tax Department, taxpayers are advised to ensure that their mobile numbers and email IDs are correctly registered with the department so that they do not miss important communications.

Otherwise, Action Will Be Taken
The Income Tax Department is continuously improving its technology to detect such fraudulent activities. This Nudge campaign is an opportunity for those who have made mistakes, whether inadvertently or intentionally. The department wants people to correct their mistakes themselves. If a person does not take advantage of this opportunity, the department may take further action.

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