In an effort to combat the rising number of fraudulent claims in Income Tax Returns (ITRs), the Income Tax Department has launched a nationwide verification operation. The operation, which commenced on July 14, 2025, involves large-scale verification across 150 locations in India. This widespread action targets individuals, ITR preparers, and intermediaries suspected of facilitating large-scale tax evasion through bogus deductions and exemptions.
The Income Tax Department's initiative is a response to the increasing misuse of provisions under the Income-tax Act, 1961. Investigations have revealed organized rackets operated by certain ITR preparers and intermediaries who file returns with fictitious deductions, false exemptions, and even fabricated Tax Deduction at Source (TDS) returns to secure inflated refunds. Taxpayers are often lured into these schemes with promises of inflated refunds in exchange for a commission.
The department is leveraging financial data from third-party sources, ground-level intelligence, and advanced artificial intelligence (AI) tools to identify suspicious patterns. Recent search and seizure operations in several states, including Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh, have yielded strong evidence of such fraudulent activities.
Preliminary analysis has revealed the rampant misuse of deduction and exemption provisions under various sections of the Income-tax Act, including 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB. These claims often lack valid documentation or justification. Employees of multinational corporations (MNCs), Public Sector Undertakings (PSUs), government departments, educational institutions, and startups have been implicated in these fraudulent activities.
The Income Tax Department has emphasized voluntary compliance, aligning with its principle of 'Trust Taxpayers First'. In the past few months, the department has proactively encouraged voluntary compliance through SMS and email advisories, nudging suspected taxpayers to revise their returns and pay the correct tax. As a result, approximately 40,000 taxpayers have revised their ITRs, voluntarily withdrawing false claims worth ₹1,045 crore. However, a significant number remain non-compliant, possibly due to the influence of the masterminds behind these fraudulent schemes.
The department is now preparing to initiate strict enforcement measures, including penalties and prosecution, against those who continue to make bogus claims. The ongoing verification exercise across 150 premises is expected to uncover crucial digital evidence and help dismantle these networks of tax evasion.
The Income Tax Department has advised taxpayers to accurately file their ITRs with correct income details and ensure proper communication details are furnished. Taxpayers are strongly advised to avoid relying on unauthorized agents or intermediaries promising undue refunds. The department has also noted that some ITR preparers use temporary email addresses for filing bulk returns and later abandon them, resulting in taxpayers missing crucial notices and communications from the department.
