A nationwide verification drive was initiated by the Income Tax Department on Monday, aimed at individuals and entities involved in submitting false claims for deductions and exemptions on their I-T returns.
According to the Central Board of Direct Taxes (CBDT), the scope of this exercise is comprehensive, extending beyond deductions for donations to encompass those for health insurance and medical costs (Section 80D and 80DDB of I-T Act), HRA (Sec 10(13A)), and interest from loans for education, housing, and vehicles (Sec 80E, 80EE and 80EEB).
The investigation is scrutinising a wide range of taxpayers, including employees of MNCs, public sector undertakings, government agencies, and academic institutions, as well as entrepreneurs who have claimed deductions without proper justification. To pinpoint potential offenders, tax authorities have been leveraging multiple databases.
Also Read: CBDT Directs Tax Officials to Monitor Top Advance Taxpayers, Check Fake Exemption Claims
The department has signalled its readiness to take severe measures against these fraudulent claims, which could involve penalties and prosecution where warranted. Officials stated that the current verification efforts at 150 locations are anticipated to uncover vital evidence, such as digital records, which will be instrumental in “dismantling the networks behind these schemes and ensuring accountability.”
This enforcement action stems from an in-depth analysis that identified widespread “misuse of tax benefits under the I-T Act, 1961,” frequently executed in collusion with professional intermediaries. Investigations brought to light “organised rackets” managed by certain ITR preparers. This move serves as a clear warning to individuals who make unsubstantiated claims.
The CBDT noted that this crackdown was preceded by an outreach program encouraging taxpayers to file revised returns if discrepancies were present. The board explained that this led to “around 40,000 taxpayers updating their returns in the last four months, voluntarily withdrawing false claims amounting to Rs 1,045 crore.” However, officials also highlighted that “many remain non-compliant, possibly under the influence of masterminds behind these evasion rackets.” Search and seizures were carried out in states like Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and MP.
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