CBDT cracks down on bogus tax deductions: Key alert for taxpayers on corrections in ITR

Taxpayers, take note: The Central Board of Direct Taxes (CBDT) is ramping up its war on fake deduction claims under Income Tax Act provisions like Sections 80GGC and 80G. On December 13, 2025, CBDT announced it detected widespread misuse via advanced analytics, urging voluntary corrections before penalties hit.

The CBDT said enforcement action against multiple tax intermediaries exposed organised rackets that were filing income tax returns using fake deductions and exemptions in exchange for commissions.

Enforcement raids exposed organised rackets run by tax intermediaries who filed returns with bogus donations to Registered Unrecognised Political Parties (RUPPs) and sham charities for commissions. These non-operational entities, often ghost addresses, issued fake receipts to slash tax bills or snag refunds, funneling funds via hawala or cross-border routes with zero real activity.

Searches on select parties and trusts unearthed evidence of phony individual donations and corporate CSR fraud. CBDT's risk profiling flags suspicious patterns early, like undocumented claims tied to dodgy outfits.

NUDGE campaign

CBDT's taxpayer-friendly 'NUDGE' initiative lets you fix errors penalty-free. Since December 12, SMS/email alerts have prompted many to file revised returns for AY 2025-26 or updated ones for prior years. Update your contact details on the e-filing portal to stay in the loop.

Analytics revealed high-risk filers claiming deductions without proof. Voluntary compliance avoids scrutiny, reassessments, or worse.

Why it matters for investors

The action follows a major CBDT crackdown launched in June against organised rackets enabling fake tax deductions. Authorities had flagged bogus rent receipts, false HRA and 80C claims, donation-linked scams and shell entities issuing fake receipts.

The move signalled a shift to data-led enforcement, targeting not just taxpayers but also intermediaries facilitating fraudulent claims.

Common Traps: Fake 80GGC (political donations) or 80G (charity) claims to inactive RUPPs/trusts.

Risks: Refunds clawed back, penalties up to 200% of tax evaded, prosecution.

Safe steps

Review claims; withdraw bogus ones.

File updated returns (u/s 139(8A)) within limits.

Verify donee authenticity via Form 10BD/10BE.

Check portal guidance on deductions.

CBDT said: "A targeted NUDGE campaign has been launched as a taxpayer friendly measure, providing them opportunity to update their ITRs and withdraw wrong claims if any. SMSs and Email advisories are being issued from 12th December 2025 to such taxpayers on their registered mobile numbers and emails. Every taxpayer is advised to ensure that correct mobile and email ids are mentioned in their filings with the Department so that they do not miss out any communication."

CBDT's tech-driven push signals no mercy for evasion networks, but grace for honest fixes. Stay compliant— portal resources make it easy. Miss the nudge? Stricter actions follow.