Income Tax Dept. Sends Messages to Taxpayers Who Claimed Donations to Political Parties u/s 80GGC

The Income Tax Department has begun sending messages to taxpayers who have claimed deductions under Section 80GGC (donations to political parties) in their Income Tax Returns ( ITR ) for the past two financial years. The department has advised them to verify their claims and correct any discrepancies by filing an updated return by March 31, 2025.

Official Message Sent to Taxpayers

The message received by taxpayers reads:

"Dear Taxpayer,
It is observed that you have claimed a deduction under section 80GGC of Rs 250,000 in your ITR for A.Y. 2023-24. It is requested that the claim may be verified and the mistake, if any, may be rectified by updating the ITR for A.Y. 2023-24 by 31.03.2025.

Warm regards,
Income Tax Department"

The message does not directly accuse taxpayers of wrongdoing, its wording suggests that the department is encouraging voluntary corrections before initiating stricter enforcement actions.

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Possible Motives Behind the Notices

The notices may be seen as a routine compliance measure, but tax experts believe the department could have a more strategic intent behind this move.

1. Scrutiny of Fake Donations: There is growing speculation that many political donation claims may be fabricated, particularly by salaried individuals who use them to reduce their taxable income. By urging taxpayers to re-evaluate their claims, the department could attempt to prompt voluntary corrections while collecting additional revenue.

Under Section 140B, any taxpayer who updates their ITR voluntarily must pay an additional tax of 25% or 50%, along with interest. This would allow the government to recover lost tax revenue without direct audits or investigations.

2. Preventing Misuse of 80GGC Deductions in FY 2024-25: The timing of these messages is also notable. With just two months left in the fiscal year 2023-24, the move could serve as a deterrent against taxpayers who might have planned to claim dubious deductions before the end of the fiscal year. Since many taxpayers make such claims in the last months of the financial year, this department action may discourage similar attempts in FY 2024-25.

3. Investigating Political Party Funding: Another possible objective is to analyze which political parties receive the most suspicious donations. If a significant number of taxpayers file updated returns, it could indicate that donations to certain political parties were being used as a tax evasion tool. This could later lead to investigations into the financial records of political parties that receive an unusually high number of donations from taxpayers who are now revising their tax filings.

What Should Taxpayers Do?

Taxpayers who have genuinely donated to political parties and have proper documentation are unlikely to face any issues. However, those who falsely claim 80GGC deductions should carefully consider their next steps. Filing an updated return voluntarily could result in additional tax payments, but ignoring the notice might lead to more serious scrutiny or audits in the future.

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