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Wednesday, October 15, 2025

Income-Tax Department detects ₹700 crore in fraudulent exemption claims - The Economic Times

The Income-Tax Department has uncovered fraudulent exemption claims amounting to approximately 700 crore, prompting enhanced risk assessment in return processing. This has led to slower refund issuance, particularly for claims exceeding 10 lakh. Taxpayers are being notified to revise returns, contributing to a 24% decrease in refunds issued as of September 17.

New Delhi: The Income-Tax Department has detected a large number of fraudulent exemption claims by taxpayers and has incorporated additional risk assessment in processing of returns by the Central Processing Centre to prevent incorrect issuance of refunds.

The attempted tax evasion through this method is pegged at about 700 crore, according to people familiar with the development.

This could lead to slower issuance of refunds, especially in cases where claims are higher than 10 lakh, they said. The claimed exemptions include false medical expenses and political and religious donations, with the majority of such taxpayers filing their income tax returns under the old tax regime.

"During the verification process, we detected that many taxpayers, mostly with income above Rs 20 lakh, were claiming wrongful refunds through fake exemptions. Interestingly, most of them were repeat offenders," a senior tax official told ET on condition of anonymity.

The department is using automated validation to cross-check all the taxpayers who were flagged for submitting exaggerated claims in the past. It has intensified use of advanced ...



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