New Delhi: The Central Board of Direct Taxes (CBDT) has uncovered large-scale misuse of donation-related tax deductions after acting against intermediaries involved in filing income tax returns with bogus claims of exemptions and refunds.
The action revealed that several intermediaries had set up extensive agent networks across the country to file returns with incorrect claims on a commission basis, significantly reducing tax liabilities for beneficiaries.
According to the tax department, a substantial portion of the false claims pertained to donations made to Registered Unrecognized Political Parties (RUPPs) and certain charitable institutions under Sections 80GGC and 80G of the Income Tax Act, 1961. These claims were allegedly used to lower tax obligations and, in many cases, to fraudulently obtain refunds.
Evidence gathered during enforcement actions indicated that many RUPPs were non-filers, non-operational at their registered addresses, and not engaged in any genuine political activity. Instead, these entities were allegedly being used as conduits for routing funds, ‘hawala’ transactions, cross-border remittances, and issuing bogus donation receipts. Follow-up searches conducted by the CBDT on some of these RUPPs and trusts yielded incriminating evidence of fake donations claimed by individuals and bogus corporate social responsibility (CSR) expenditure claimed by companies.
Stricter Vigil
The CBDT said it has further strengthened its data-driven and analytics-based approach to detect suspicious claims at an early stage and identify high-risk taxpayer behaviour patterns. One such pattern has been identified in cases where taxpayers claimed deductions for donations to entities whose genuineness could not be established or where relevant information was not adequately disclosed.
Based on these analytics, the department noted that many taxpayers are suspected of having availed wrongful deductions. However, it added that a significant number of taxpayers have already revised their income tax returns for the current assessment year 2025-26 and have also filed updated returns for earlier years to correct such claims.
As a taxpayer-friendly compliance measure, the CBDT has launched a targeted ‘NUDGE’ campaign, giving taxpayers an opportunity to voluntarily update their returns and withdraw incorrect claims, if any. As part of the campaign, SMS alerts and email advisories are being sent from December 12, 2025, to identified taxpayers on their registered mobile numbers and email addresses.
The tax department has advised all taxpayers to ensure that their contact details are correctly updated in the income tax records so that they do not miss any official communication related to compliance and corrective action.
(Cover pic: PickPic.com)