Made a Political Donation? Income Tax Dept Tightens Scrutiny

Made a Political Donation? Income Tax Dept Tightens Scrutiny

• Many taxpayers who claimed deductions under Section 80GGC (political donations) are now receiving income tax notices.
• Section 80GGC allows individuals to claim deductions for contributions to registered political parties or electoral trusts. However, due to a surge in fake or unsupported claims, the Income Tax Department has stepped up verification.
• The IT Department has launched a Tax Assist facility on its e-filing portal. This helps taxpayers respond to notices online and upload the necessary donation receipts.

What to do if you claimed wrongly?

• If you don’t have valid proof, you must withdraw the claim.
• This can be corrected by filing an ITR-U (Updated Return) within the allowed time limit.
• Ignoring the notice can result in penalties, interest, and further scrutiny.

Salaried Taxpayers Beware!

• If you have made donations to political parties or electoral trusts and claimed deductions without proper proof or eligibility, you may attract scrutiny from the Income Tax Department.
• In case such deductions have been wrongly claimed and not yet reversed, you should rectify this immediately. The correction can be made by filing an ITR-U (Updated Return) within the permissible period under Section 139(8A) of the Income Tax Act.
• Acting early helps you avoid penalties, interest, or notices later. Only genuine donations backed by valid receipts are eligible under Section 80GGC. Salaried taxpayers, in particular, should review their ITRs and act quickly if any incorrect claims were made.

Income Tax Dept’s “Cleaning” Drive Before ITR Season

The Income Tax Department has conducted raids at 200+ locations across India, uncovering a network of intermediaries helping salaried taxpayers file fraudulent ITRs by misusing deductions and exemptions. Fraudulent refunds were often claimed by salaried taxpayers through fabricated documents under these provisions:

• Section 80C – Fake claims for LIC, PPF, ELSS, tuition fees, etc.

• Income tax Section 80D – Bogus medical insurance premium receipts.

• Section 24(b) – Fake housing loan interest certificates from non-existent/related parties.

• Sec 10(13A) (HRA) – Fake rent receipts, even from family members, while living in own house.

• Section 80E / 80EEA – False claims for interest on education/home loans never availed.

• Sec 80DDB – False deductions for medical treatment without certified documents.

• Section 80G – Fake donations cross-verified through online systems.

• Sec 80GGC – Political donations under scrutiny; donees are now being investigated.

Impact So Far on Cleaning Drive During ITR Season :

• 40,000 taxpayers have already withdrawn false claims.

• INR 1,045 crore of fictitious deductions voluntarily reversed.

What Taxpayers Should Do

• Review your ITR for any doubtful deductions/exemptions.

• Withdraw incorrect claims by filing an ITR-U (Updated Return) within the prescribed time.

• Voluntary compliance now will save you from penalties, prosecution, and higher interest later.

• The department is cleaning house before the ITR season. Any fake claims are traceable and may invite notices, raids, and penal consequences.

CBDT Issue Warning & Awareness Campaign Fraudulent Deduction Claims On Donations

Press release from CBDT regarding bogus deductions in income tax returns. This press release is essentially a warning and awareness campaign by the Central Board of Direct Taxes to curb fraudulent deduction claims, especially related to donations to political parties and charitable institutions. Key Points from the Press Release

• The Income Tax Department has acted upon intermediaries filing returns with bogus claims of deductions and exemptions under the Income Tax Act. Many intermediaries were filing incorrect claims on a commission basis.
• A large number of bogus claims were made as donations to Registered Unrecognized Political Parties or Charitable Institutions. Evidence shows Registered Unrecognized Political Parties were mostly non-filers, non-operational, and not engaged in political activities. Bogus receipts were issued for routing funds, hawala transactions, cross-border remittances, and issuing donation receipts.
• The Central Board of Direct Taxes has identified high-risk behavior patterns, especially U/s 80GGC or 80G of the Income Tax Act. Many taxpayers are suspected of indulging in claiming deductions for donations to suspicious entities without proper verification.
• A targeted NUDGE campaign has been launched to encourage taxpayers to file accurate returns and avoid incorrect claims. Advisory messages are being issued from 12th December 2025.
• Taxpayers should ensure correct mobile numbers and email IDs in their profiles to avoid missing communication. Additional information on deduction provisions and filing updated returns is available at incometax.gov.in.
• Advisory for Taxpayers: Taxpayers should:

• • Claim deductions only for genuine donations
  • Verify the registration, compliance status, and authenticity of the recipient entity
  • Avoid engaging intermediaries offering assured refunds or inflated deductions
  • Rectify errors promptly to avoid penalties, interest, and prosecution