The Central Board of Direct Taxes (CBDT) has intensified scrutiny of suspicious income tax deductions—particularly claims linked to donations to political
parties and charitable trusts—using a data-driven enforcement strategy backed by targeted taxpayer outreach.
In a statement issued on December 13, the tax authority said it detected large-scale misuse of deduction provisions under the Income Tax Act through advanced analytics, prompting many taxpayers to voluntarily revise their returns after receiving official alerts.
According to the CBDT, enforcement actions against several tax intermediaries uncovered organised networks engaged in filing income tax returns with bogus deductions and exemptions on a commission basis. These intermediaries allegedly facilitated fake donation claims to Registered Unrecognised Political Parties (RUPPs) and certain charitable institutions, allowing taxpayers to reduce tax liabilities and, in some cases, claim fraudulent refunds.
Investigations revealed that several RUPPs involved were non-operational, failed to file returns, and were not functioning from their registered addresses. The tax department said such entities were misused as conduits for routing funds, including suspected hawala transactions and cross-border remittances, while issuing donation receipts without any genuine political or charitable activity.
The CBDT added that follow-up searches were conducted on select political parties and trusts, uncovering incriminating evidence of bogus donations by individuals and fraudulent Corporate Social Responsibility (CSR) claims by companies.
As part of its preventive approach, the tax authority has strengthened analytics-based risk profiling to identify high-risk behavioural patterns early. One such pattern relates to deductions claimed under Sections 80GGC and 80G of the Income Tax Act, covering donations to political parties and charitable institutions.
Data analysis showed that several taxpayers either claimed deductions linked to suspicious entities or failed to provide adequate documentation to establish genuineness. Following these red flags, a significant number of taxpayers have revised their returns for assessment year 2025–26 and filed updated returns for earlier years.
To encourage voluntary compliance, the CBDT has launched a targeted ‘NUDGE’ campaign, described as a taxpayer-friendly initiative that allows individuals to correct errors and withdraw incorrect claims without immediate punitive action. SMS and email advisories have been sent to identified taxpayers since December 12, 2025.
The department has advised taxpayers to keep their contact details updated to avoid missing critical communications. Additional guidance on deductions and updated return filings is available on the income tax portal.
The move underscores the CBDT’s broader push towards technology-led compliance, even as it tightens action against organised tax evasion routed through fake donation channels.
