The Central Board of Direct Taxes (CBDT) has stepped up its efforts to curb bogus deduction and exemption claims, nudging taxpayers to voluntarily correct their income tax returns before stricter action follows.
In a recent move, the Income Tax Department has acted against several intermediaries and return filers who were found helping taxpayers claim fake deductions and refunds under the Income Tax Act. These intermediaries allegedly operated through a wide network of agents across the country, filing returns with incorrect claims on a commission basis, the Income Tax Department said in a release on December 13.
How bogus deduction claims were made
Investigations revealed that a large number of false claims were routed through donations to Registered Unrecognised Political Parties (RUPPs) and certain charitable institutions under Sections 80G and 80GGC of the Income Tax Act.
According to the tax department, many of these RUPPs were non-filers, non-operational at their registered addresses and had no actual political activity. Despite this, they were issuing donation receipts that were used by individuals and companies to reduce tax liability, claim bogus refunds and route funds through suspected hawala and cross-border remittance channels.
Follow-up searches conducted by the department on some RUPPs and trusts uncovered incriminating evidence of bogus donations by individuals and fake CSR claims by companies.
Background: June crackdown on fake deduction rackets
This action follows a major crackdown launched earlier this year in June, when the CBDT and the government exposed organised rackets facilitating fake tax deductions.
At the time, the department had flagged fake rent receipts, bogus HRA and 80C claims, donation-based deduction scams and shell entities issuing receipts without real transactions.
The June action made it clear that the tax department was shifting to a data-led enforcement model, focusing not just on taxpayers, but also on the ecosystem of fake consultants and intermediaries enabling such claims.
Data analytics flags high-risk taxpayers
As part of this intensified scrutiny, the CBDT has strengthened its data-driven approach to detect suspicious behaviour early.
Using advanced analytics, the department identified high-risk patterns, especially among taxpayers claiming deductions under Sections 80G and 80GGC, where donations were made to suspicious or unverifiable entities and adequate information was not available to establish the genuineness of the recipient organisations.
Based on this analysis, the department suspects that a significant number of taxpayers may have wrongly claimed deductions, either knowingly or due to advice from unauthorised intermediaries.
CBDT’s ‘nudge’ instead of immediate penalty
Instead of immediately launching punitive action, the CBDT has rolled out a targeted “NUDGE” campaign, positioning it as a taxpayer-friendly measure.
Under this campaign:
Taxpayers are being given an opportunity to revise their returns
Wrong claims can be withdrawn voluntarily
Updated ITRs can be filed for past assessment years
A large number of taxpayers have already revised their returns for the current Assessment Year 2025–26 and filed updated ITRs for previous years.
To reach affected taxpayers directly, the Income Tax Department has started sending SMS and email advisories from December 12, 2025, on registered mobile numbers and email IDs.
Taxpayers have been advised to ensure their contact details are updated on the income tax portal so that they do not miss official communication.
Link to ITR processing delays and refund slowdown
This crackdown also explains why ITR processing and refunds have been slower this year.
At a recent public event, the CBDT chief acknowledged a surge in incorrect and suspicious claims and the need for additional verification. He said that flagged cases have contributed to delays in processing returns and issuing refunds.
In simple terms, when returns are loaded with bogus deductions or mismatched data, they get diverted for deeper scrutiny — slowing down not just those cases, but the overall system.
Clear message from the tax department
The message from the CBDT is now unambiguous: Wrong claims will be detected and intermediaries enabling fake deductions are under scanner
Taxpayers still have a window to course-correct voluntarily
For honest taxpayers, the advice is straightforward — claim only genuine deductions, verify donation recipients, and avoid shortcuts suggested by unauthorised agents. The cost of getting it wrong today could be far higher tomorrow.