I-T Raids on Fake Tax Deductions

1.Introduction:

The Income Tax Department launched a major search operation on July 11, 2025, in connection with a case involving bogus claims of deductions and exemptions made in Income Tax Returns (ITRs).

2. Nationwide Search Covering 150+ Locations

Searches are being carried out at more than 150 locations across various states, including:

Delhi, Maharashtra, Tamil Nadu, Gujarat, Punjab, Karnataka, Kerala, Andhra Pradesh, Telangana, Uttar Pradesh, Madhya Pradesh

This wide coverage highlights the scale of the suspected tax fraud and the department’s strong crackdown across India.

3.Who Is Being Investigated?

The search targets include:

Middlemen

Entry operators

Tax professionals

Taxpayers

These individuals are suspected of creating or using fake documents to claim false deductions and tax exemptions, with the aim of illegally reducing tax liability or getting refunds.

4.Types of Bogus Deductions Under Investigation

The department has identified multiple deduction categories that were allegedly misused:

Political donations

Medical insurance (Section 80D)

House rent (HRA claims)

Loan repayments

Other deduction-related exemptions

Many of these claims were made using forged or duplicate documents.

5.Detected Through Data Analytics

The Income Tax Department used advanced data analytics to detect this fraud. Suspicious patterns in tax refund claims were observed in the system.

This led to tracing multiple fraudulent claims back to common intermediaries and consultants.

6.Evidence Collection Underway

During the searches, the department is:

Collecting both physical and digital evidence

Examining taxpayer-consultant linkages

Verifying deduction-related documents

These steps are essential for legal action and to prevent similar fraud in the future.

7.Reuse of Same Documents in Multiple Returns

A key finding is that identical or similar documents were used across multiple ITRs, even by people not related to each other. This suggests:

Use of template deduction documents

A systematic fraud network

Many taxpayers had no actual eligibility for the claimed deductions

8.Introduction of the “NUDGE” Campaign

Before starting the raids, the Income Tax Department had launched a “NUDGE” campaign, which played a key role in the case.

What is the NUDGE campaign?

It’s a behavioral initiative where the department alerts taxpayers about possible mismatches or errors in their ITRs.

Taxpayers are given an opportunity to voluntarily revise or correct their returns without penalty.

Result:

A large number of taxpayers voluntarily withdrew their false deduction and exemption claims after receiving NUDGE alerts.

This shows the department’s focus on encouraging voluntary compliance before taking enforcement action.