Income Tax Department Cracks Down On Fake I-T Refunds, Conducts Raids Across States
The department initiates a large-scale verification operation across multiple locations, targeting those facilitating fraudulent claims of deductions and exemptions in ITRs.
In a major action launched across multiple states against fake refunds, the income tax department on Monday said it has cracked down on widespread abuse of tax deductions and exemptions claimed during income tax returns (ITRs).
'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). This action follows a detailed analysis of the misuse of tax benefits under the Income-tax Act, 1961, often in collusion with professional intermediaries," the Central Board of Direct Taxes, under the Ministry of Finance, said in a statement on July 14.
Tax Fraud Spread Across States
According to the statement, the fraud spans several states, including Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh, where recent search and seizure operations have yielded concrete evidence.
To identify suspicious patterns, the department has leveraged financial data received from third-party sources, ground-level intelligence, and advanced artificial intelligence tools, it added.
In several cases, the tax department found that forged email IDs had been used to file ITRs without the actual knowledge of the taxpayer, leaving them unaware that bogus deductions were being claimed in their name.
The department flagged rampant misuse under various sections of the Income-tax Act, including Section 10(13A) (House Rent Allowance), Section 80C (Investment-linked deductions), Section 80D (Health insurance), Section 80G, 80GGA (Donations), Section 80E, 80EEB (Education and vehicle loan interest), and Section 80DDB (Critical illness expenses).
'Analysis reveals rampant misuse of deductions under sections 10(13A), 80GG, 80C, 80D, 80E, 80EEB, 80G, 80GGA, and 80DDB. Exemptions have been claimed without valid justification. Employees of MNCs, PSUs, government bodies, and private sector entities are among those implicated. Taxpayers are often lured into these malpractices with promises of inflated refunds in return for a small commission," the CBDT stated.
In many cases, the intermediary uses fabricated information and documents to create a significant risk to the filing taxpayer, it added.
The crackdown follows the deployment of advanced analytics and AI tools by the department to detect unusual deduction patterns and trace suspicious refund trends.
'To identify suspicious patterns, the Department has leveraged financial data received from third-party sources, ground-level intelligence, and advanced artificial intelligence tools," the CBDT said.
In one case, an organized syndicate operating in multiple cities was found to be fraudulently withdrawing false claims amounting to Rs 1,045 crore. However, many remain non-compliant, possibly unaware of the seriousness of the matter, it added.
Warning and Window for Correction
Despite the scale of the fraud, the department said it is willing to offer non-compliant taxpayers a chance to voluntarily revise their returns, in keeping with its principle of 'Trust Taxpayers First'. SMS and email alerts are being sent to suspected individuals, urging them to correct or withdraw their incorrect filings before stricter action is taken.
'In line with its guiding principle of 'Trust Taxpayers First', the Department has offered an opportunity to non-compliant individuals and intermediaries to revise their returns and pay the including SMS and email campaigns, will enable taxpayers to revisit the content of their returns," it said.
'Department Poised To Take Stern Action Against Continued Fraudulent Claims'
The Department is now poised to take stern action against continued fraudulent claims, including penalties and prosecution where applicable. The ongoing verification exercise across 150 premises is aimed at deterring such behaviour. The findings reflect the swift action taken by the Department, which will aid in dismantling the networks behind these crimes and ensure accountability under the law, the CBDT said in the statement.
Further investigations are underway in coordination with intelligence and enforcement authorities, it added.
'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," it said.
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