Income Tax News: ITR Filing 2025: Income Tax Department Cracks Down on Fake Deductions Through HRA, EV Claims, and Political Donations

As the deadline for Income Tax Return (ITR) Filing for Assessment Year 2025–26 approaches, the Income Tax Department has ramped up scrutiny against individuals and entities allegedly exploiting deduction loopholes—especially in claims related to House Rent Allowance (HRA), Electric Vehicle (EV) purchases, and political donations.

Bogus Claims Under Scanner

The department has flagged a noticeable surge in fraudulent deductions being claimed by salaried taxpayers using fake rent receipts, misreporting EV purchases for rebates under Section 80EEB, and claiming donations to non-existent or unverified political parties. According to senior tax officials, technology-driven verification tools like AIS (Annual Information Statement) and Form 26AS matching are being used aggressively to detect discrepancies.

A senior official from the Central Board of Direct Taxes (CBDT) said:

“We have observed attempts to claim undue refunds by misusing deduction sections. This year, the department is employing AI-assisted red flags and cross-verification with third-party data to curb such practices.”

What Could Land You in Trouble?

Submitting fabricated rent agreements or receipts without valid landlord details.

Claiming EV deductions for vehicles not registered in your name or purchased outside the eligible window.

Making donations to unregistered political outfits or submitting inflated donation amounts.

Taxpayers found guilty of false deductions may face penalties, reassessment of returns, or even prosecution under Section 277 of the IT Act.

Advice to Taxpayers

Experts are urging taxpayers to be transparent and avoid shortcuts. CA Nikhil Arora says:

“Claim only those deductions that are supported by valid documentation. If caught, not only will the refund be blocked, but interest and penalties may follow.”

With the ITR deadline of September 15, 2025, looming for most categories, the department is expected to continue its strict surveillance on all deduction-related claims.