As the July 31 deadline for filing Income Tax Returns (ITRs) for FY 2024-25 approaches, the Income Tax Department has issued a strong warning against claiming fraudulent deductions and exemptions. On Monday, July 14, 2025, the department launched a large-scale verification operation targeting individuals and intermediaries involved in misusing tax provisions to inflate refunds.
This move signals a tougher stance against ITR fraud in India, especially amid growing concerns over fake deductions filed under popular sections such as Section 10(13A), 80G, 80D, 80EE, 80GGC, and others.
Why Is the Tax Department Cracking Down?
The crackdown comes after authorities uncovered an alarming rise in fraudulent ITR filings using fictitious deductions and false TDS claims. In a detailed official statement, the Income Tax Department said that these abuses often stem from organized rackets of ITR preparers and agents promising “inflated refunds” in exchange for commissions.
These agents lure taxpayers—ranging from MNC and PSU employees to entrepreneurs and government staff—into schemes that appear legitimate but are rooted in fraudulent claims.
How the Fraud Was Detected
Using a combination of third-party financial data, AI-powered analytics, and on-ground intelligence, the Tax Department identified suspicious filing patterns across several states, including:
- Maharashtra
- Delhi
- Tamil Nadu
- Gujarat
- Punjab
- Madhya Pradesh
Subsequent search and seizure operations uncovered vast digital evidence showing misuse of various income tax deductions—often without any supporting documentation.
Misused Tax Sections Include:
The Department found large-scale misuse under:
- Section 10(13A): House Rent Allowance
- Section 80D: Health Insurance Premiums
- Section 80G: Donations to Charitable Institutions
- Section 80E: Interest on Education Loans
- Section 80GGC: Contributions to Political Parties
- Section 80DDB, 80EE, 80EEB, and 80GGA
In many cases, taxpayers had no real justification for the deductions claimed.
Temporary Emails and Abandoned Communications
An alarming finding in the operation was that many fraudulent ITRs were filed using temporary email IDs, which were abandoned after submission. This loophole prevents the department from effectively communicating with filers, often delaying enforcement actions.
Despite India’s digitally empowered tax system, lack of proper contact information has become a significant hurdle.
Income Tax Department Issues a Stern Warning
The Department has made it clear that stern action will be taken against individuals and preparers involved in false claims, including:
- Heavy penalties
- Prosecution under the Income Tax Act
- Blacklisting of intermediaries
- Seizure of digital and physical records
The ongoing verification drive at over 150 locations is expected to produce critical evidence to dismantle the fraudulent networks.
Voluntary Compliance: A Silver Lining
Interestingly, in response to recent warnings, over 40,000 taxpayers have voluntarily revised their ITRs, withdrawing false claims worth ₹1,045 crore in the last four months.
However, the department notes that many remain non-compliant, possibly under the continued influence of unlicensed agents.
What Should Taxpayers Do Now?
If you’re planning to file your ITR for FY 2024-25, here’s what you must do:
- Ensure Accurate Information: Declare your true income and eligible deductions only.
- Avoid Unregistered ITR Preparers: Consult only qualified Chartered Accountants or authorized tax professionals.
- Use Correct Email and Mobile: Always provide your active email ID and phone number for communication.
- Maintain Documentation: Keep records of medical bills, donations, rent receipts, etc., for any deductions claimed.
- Don’t Fall for Refund Scams: Avoid any “agent” or “consultant” promising large refunds without proof.
Final Word: Accuracy Over Ambition
In the digital age, AI-powered scrutiny and data-matching tools make it easier than ever for the Income Tax Department to spot anomalies. Filing a false ITR may bring short-term gain but invites long-term legal pain.
With tax season in full swing, it’s time to choose transparency and compliance over greed and shortcuts. When in doubt, seek help from a certified tax expert, not shady agents with lofty refund promises.
This article is for informational purposes only and should not be considered legal or financial advice. Please consult a qualified Chartered Accountant or tax advisor for assistance with your specific situation under the Income Tax Act, 1961.