Don’t Fall for Fake Tax Deduction Claims: Stay Safe, Stay Legal
Fake tax deduction claims are back in the spotlight. The Income Tax Department recently raided over 150 locations across India after detecting bogus deduction entries in ITRs — especially under Section 80G, 80D, and other common refund-driven heads. From fake donation receipts to inflated medical premiums, the racket was widespread.
But here’s the truth: filing a false claim may get you a refund today, but a notice, penalty, and even prosecution tomorrow.
Let’s break this down so you don’t end up in trouble.
What Are Fake Tax Deduction Claims?
These are deduction entries made in your ITR without actual proof or valid eligibility, often under:
- Section 80G – Fake donations to non-existent NGOs
- Section 80D – Medical insurance premiums never paid
- Section 80C – Fabricated LIC or PPF investments
- Section 10(14) – Falsely claimed HRA or travel allowance
- Chapter VI-A in general – Bulked-up deductions to inflate refunds
Such entries are red flags in the tax system. Once your return is selected for scrutiny or data-matched with TDS/Form 26AS/AIS, the consequences follow.
What Happened in the Recent IT Raids?
- Over 150 premises raided in Delhi, Mumbai, Hyderabad, Kolkata, and other cities
- The department found large-scale fabricated deduction entries in ITRs filed by salaried and small business taxpayers
- In many cases, agents were charging commissions per refund
- Mismatches were detected via AI-based refund risk analysis and donation UIN cross-verification
Source: Official press release from the Income Tax Department and inputs from CBDT-led investigations.
Penalties for Fake Deductions: What the Law Says
| Violation | Section | Consequence |
|---|---|---|
| Misreporting deduction or income | Section 270A | Penalty of 50% of tax avoided |
| Wilful false entry/fabrication | Section 277 | Prosecution (up to 7 years imprisonment) |
| Non-response to scrutiny notice | Section 142(1), 144 | Best judgement assessment with tax + penalty |
| Using fake receipts or bills | Various | Treated as tax evasion |
Common Scams to Avoid
- Donation UIN mismatch: Donations claimed without valid 80G certificate and UIN
- Bulk return filings by agents: A single agent files 500+ returns with same deduction pattern
- Bogus insurance premiums: ₹50,000 claimed under 80D without any policy proof
- Fake LIC/PPF entries: Entries made without investment slips or bank linkage
- HRAs without rent receipts: Salaried class wrongly claims rent without living in rented premises
Expert Tip: How to Claim Deductions the Right Way
“Only claim deductions you can prove with bills, bank records, or valid certificates. Don’t let an agent file your return unless you cross-check everything. Remember, it’s your PAN on the return — not theirs.”
– Efiletax Compliance Desk
How to Protect Yourself from Wrong Claims
- Use Form 26AS and AIS to verify income and TDS before claiming deductions
- Insist on receipts, donation UINs, and payment proofs
- Avoid agents who promise “guaranteed refunds” or charge a % of refund
- Cross-check your return before e-verification — mistakes can’t be undone once processed
- Hire a qualified tax professional who explains what’s being filed
Filing Deductions? Here’s a Legit Checklist
✅ Life insurance premium – Copy of receipt + bank statement
✅ Mediclaim – Policy + payment proof
✅ Education loan – Interest certificate from bank
✅ Donations – 80G certificate with UIN
✅ Home loan – Interest and principal breakup from lender
✅ HRA – Rent receipts + landlord PAN if over ₹1 lakh/year
Frequently Asked Questions (FAQ)
Q1. What happens if I claimed a deduction by mistake?
If it was unintentional and you file a revised return before scrutiny starts, the penalty risk is lower.
Q2. Can I be jailed for a wrong deduction?
Yes, Section 277 allows prosecution for willful false statements.
Q3. I used an agent and got a refund. Will I be responsible?
Yes. The Income Tax Act holds the assessee (you) liable — not the agent.
Summary
Fake tax deduction claims under 80C, 80D, and 80G can trigger IT raids and penalties. Avoid agents offering guaranteed refunds. Always file accurate returns with valid proof. Misreporting can lead to hefty fines or even jail. Stay compliant by filing through trusted professionals.
Final Word: Stay Clean, File Smart
The Income Tax Department is using tech to track mismatches, donations, and deduction frauds. Don’t risk your PAN and peace of mind for a few thousand rupees in fake refunds.