40K Taxpayers Withdraw ₹1,045 Crore in Bogus ITR Deductions & Exemptions as Income Tax Department Strengthens Crackdown

The Central Board of Direct Taxes (CBDT) has doubled down on its nationwide campaign against taxpayers who had fraudulently claimed bogus exemptions and deductions in their Income Tax Returns.

The outreach campaign, which is already underway, has resulted in more than 40,000 taxpayers voluntarily withdrawing false deductions and exemptions totaling ₹1,045 crore over the last four months.

The Income Tax Department issued a press release dated 14 July 2024, signed by V. Rajitha, Commissioner of Income Tax (Media & Technical Policy) and spokesperson for the CBDT, and issued on July 14 in New Delhi signals the large-scale verification operation undertaken by the Department.

The Income Tax Department’s operation primarily targets individuals and entities facilitating bogus deductions and exemptions across multiple locations in India. The Department’s move comes in the wake of detailed analysis revealing widespread misuse of beneficial provisions under the Income-tax Act, 1961, often done in collusion with certain entities that prepare or file ITRs for taxpayers.

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The official release also notes that the targeted intermediaries have been orchestrating rackets that facilitate the availment of false deductions and exemptions for taxpayers, and in some cases, even assist in the preparation of fictitious TDS returns to secure excessive refunds than actually due.

The Income Tax Department utilized financial data from third-party sources, ground-level intelligence and advanced artificial intelligence tools to spot suspicious patterns signaling such bogus availment. Subsequent search and seizure operations conducted in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh uncovered concrete evidence of fraudulent filings across various groups and entities.

Among the most abused provisions are deductions under sections 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB of the Income Tax Act, 1961. Exemptions have frequently been claimed without adducing valid justification, at times even implicating employees of multinational corporations, public sector units, government bodies, academic institutions and entrepreneurs in the process.

Taxpayers are often lured into these schemes with promises of inflated refunds in exchange for a commission. Despite the robust, e-enabled tax administration mechanism, communication gaps remain a glaring fault especially since many ITR preparers use temporary email IDs for bulk filings and later abandon them, resulting in official notices being delivered to dead inboxes.

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The Department has adopted the principle of ‘Trust Taxpayers First’, conducting extensive outreach programs through SMS, email advisories,and on-campus programs urging suspected taxpayers to revise their returns and pay the correct tax.

The outreach programs were met with massive response as over 40,000 taxpayers updated their filings and withdrew fraudulent claims, however, the Department remains wary that many taxpayers still remain non-compliant, possibly under the sway of evasion rackets.

With over 150 premises currently under verification, the Department has announced that stern action including penalties and prosecution shall apply to those continuing with false claims.

All taxpayers have been advised to review their ITRs and ensure that the deductions and exemptions claimed in their returns are genuine in nature, and to refrain from following unauthorized advice.

Further investigations are ongoing, and the Department is determined to dismantle fraud networks enabling tax evasion and to ensure accountability under the law.

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