Income Tax Department launches nationwide crackdown against bogus tax benefit claims

New Delhi: The Income Tax department has launched a sweeping verification drive to expose fraudulent tax benefit claims filed by assessees, often with the assistance of professional intermediaries, in what the authorities described as an organised racket to abuse tax incentives.

These rackets are operated by certain people who prepare income tax returns (ITR) and intermediaries who file them, said an official statement from the Central Board of Direct Taxes (CBDT). Taxpayers are often lured into these fraudulent schemes with promises of inflated refunds in return for a commission.

Employees of multinational companies, public sector units, government bodies, academic institutions, and entrepreneurs are among those implicated, the I-T department said. Investigations are underway in 150 premises.

This drive follows a detailed analysis of the misuse of tax benefits under the Income Tax Act, often in collusion with professional intermediaries, CBDT said.

Data analysis has revealed misuse of the facility allowed under the law to deduct certain expenses while computing the taxable income. These allowed deductions include house rent allowance, donations to political parties, interest on education loans, medical insurance premium, interest on first home loan and medical expenses for serious ailments.

“Investigations have uncovered organised rackets operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions. These fraudulent filings involve the abuse of beneficial provisions, with some even submitting false tax deducted at source (TDS) returns to claim excessive refunds,” the statement said.

To identify suspicious patterns, the Income Tax department leveraged financial data received from third-party sources, ground-level intelligence, and advanced artificial intelligence tools.

These findings are further substantiated by recent search and seizure operations conducted in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh, where evidence of fraudulent claims was found to have been used by various groups and entities, the statement said.

The tax authority said tax exemptions have been claimed without valid justification in these cases.

In line with its guiding principle of ‘trust taxpayers first’, the IT department has emphasised voluntary compliance, the statement said.

Over the past year, the department has carried out extensive outreach efforts, including SMS and email advisories, nudging suspected taxpayers to revise their returns and pay the correct tax, it said.

Physical outreach programs have also been conducted. As a result, approximately 40,000 taxpayers have updated their returns in the last four months, voluntarily withdrawing false claims amounting to ₹1,045 crore. However, many remain non-compliant, possibly under the influence of the masterminds behind these evasion rackets, the statement said.

“The IT department is now poised to take stern action against continued fraudulent claims, including penalties and prosecution wherever applicable. The ongoing verification exercise across 150 premises is expected to yield crucial evidence, including digital records, that will aid in dismantling the networks behind these schemes and ensure accountability under the law. Further investigations are currently underway,” CBDT said.

Taxpayers are again advised to file correct particulars of their income and communication coordinates and not be influenced by advice from unauthorised agents or intermediaries promising undue refunds, CBDT stated.