The Income Tax Department initiated a large-scale verification operation across multiple locations in the country on 14th July 2025, targeting individuals and entities facilitating fraudulent claims of deductions and exemptions in Income Tax Returns (ITRs), the Finance Ministry said in a release on Monday.
This action follows a detailed analysis of the misuse of tax benefits under the Income-tax Act, 1961, often in collusion with professional intermediaries.
Investigations have uncovered organised rackets operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions, the release said. These fraudulent filings involve the abuse of beneficial provisions, with some even submitting false TDS returns to claim excessive refunds, it added.
Tax dept uses data analytics, advanced tools to track fraudulent claims
To identify such irregularities, the tax department has leveraged technology tools, including data analytics, third-party sources, conduct intelligence, and advanced artificial intelligence tools, the ministry said.
“These findings have further substantiated by recent search & seizure operations conducted in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Karnataka. In these cases, evidence of fraudulent tax claims has also been unearthed via various groups and persons,” it added.
“Analysis reveals rampant misuse of deductions under sections 10(14), 80GG, 80E, 80D, 80EE, 80EEA, 80G, 80GGA, and exemptions u/s 10(13A) and others, without actual eligibility. Employees of MNCs, PSUs, and government entities have also been identified as wrongfully claiming these benefits. In many cases, salaried individuals have filed returns with inflated or fudged deduction claims to reduce taxable income or claim refunds. Also, some individuals have made attempts at inflating income or mismatching deductions to game the refund mechanism and withdrew them later to avoid penalties once scrutiny ensued,” the ministry noted.
Huge revenue loss for the exchequer
Such actions, the release claimed, not only create a huge revenue loss for the exchequer but also increase the burden on honest taxpayers and delay genuine refunds.
“Under the continuing theme of ‘Trust Taxpayers First’, the Central Board of Direct Taxes (CBDT) has constantly emphasized maintaining taxpayer confidence while ensuring strict action against willful tax evaders. The Department has now taken steps to ensure the perpetrators are identified and appropriate action under the law is initiated. This includes scrutiny of the concerned ITRs, withholding of refunds, and initiation of penalty and prosecution proceedings in appropriate cases,” the release said.
The tax department is also poised to take stern action against continued fraudulent claims, including penalties and prosecution, wherever deliberate attempts to claim undue benefits are established under the law. These operations and investigations are likely to widen further. This will aid in dismantling the networks behind these schemes and ensure accountability under the law. Further investigations are currently underway.
Taxpayers are again advised to file correct particulars of their income and communication coordinates and not be influenced by advice from unauthorized agents or intermediaries promising undue refunds.