The Central Board of Direct Taxes (CBDT) has intensified its crackdown on bogus tax deduction claims, launching a data-driven investigation aimed at identifying fraudulent donations made in the name of political parties and charitable institutions. Using advanced analytics and risk profiling, the tax authority has unearthed multiple cases where deductions were falsely claimed under Sections 80G and 80GGC of the Income Tax Act.
In a statement issued on December 13, the CBDT said its data analysis had flagged suspicious patterns in returns filed by individuals and entities that misused deduction provisions to evade taxes or claim illegal refunds.
Network of Intermediaries Behind the Fraud
The investigation has exposed a web of tax intermediaries and agents operating organized rackets that facilitated fake deduction claims in exchange for commission. According to CBDT, these networks were issuing fabricated donation receipts in the name of Registered Unrecognised Political Parties (RUPPs) and certain charitable institutions.
Taxpayers were allegedly using these receipts to reduce their tax liability or secure fraudulent refunds, creating a large-scale manipulation of the tax system.
Inactive Political Parties Used as Fronts
The probe further revealed that several RUPPs named in the deduction claims were non-functional they had not filed returns, operated no offices at their registered addresses, and were merely used as fund-routing fronts.
CBDT stated that these entities were likely involved in hawala-style transactions and cross-border fund movements, with no genuine political or philanthropic activity. Despite this, donation receipts were systematically issued under their names.
Follow-Up Searches Yield New Evidence
CBDT confirmed that follow-up searches and survey operations were conducted on certain political outfits and trusts. These raids led to the discovery of fake donation records, fraudulent CSR (Corporate Social Responsibility) claims by companies, and other unverified financial entries.
Officials added that several registered intermediaries and tax consultants were found to be part of the network, arranging fictitious deductions for clients in return for a fixed percentage commission.
Taxpayers Revising Returns After Alerts
Following the enforcement drive, a significant number of taxpayers have voluntarily revised or updated their income tax returns. CBDT noted a sharp rise in revised filings for the Assessment Year 2025–26, particularly from individuals who realized that their advisors or intermediaries had claimed deductions without proper authorization or documentation.
The department has strengthened its data analytics system to identify high-risk deduction patterns, especially those related to donations under Sections 80G and 80GGC.
‘NUDGE’ Campaign to Encourage Voluntary Compliance
To promote voluntary compliance, CBDT has launched a ‘NUDGE’ initiative, designed to allow taxpayers to rectify mistakes without immediate penal action.
Starting December 12, the department has begun sending SMS and email advisories to selected taxpayers, reminding them to verify and correct dubious claims. Officials have urged taxpayers to update their contact details in departmental records to ensure they receive critical communications in time.
CBDT also stated that detailed guidance on deduction provisions and filing updated returns is available on the official income tax portal, encouraging taxpayers to seek clarification before filing.
Step Toward Data-Driven Tax Governance
Experts have hailed the move as a major step toward data-driven tax administration in India. The campaign, they say, will not only curb misuse of tax provisions but also enhance transparency and trust between taxpayers and authorities. A senior tax official remarked,
“This is not just a punitive measure it’s a compliance-oriented initiative. Our goal is to ensure that tax benefits are availed only by those who are legally entitled to them.”
