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 data analytics and artificial intelligence (AI) to identify discrepancies in reporting of income by taxpayers.
Officials said the department is sending intimation to taxpayers so that they can revise their tax returns. “This verification is taking additional time, a reason why the refund process is slower compared to last year,” the official said, adding that the department is closely monitoring the processing so that other pending income tax returns are cleared at the earliest.Refunds issued by the Income Tax Department fell 24% to Rs 1.60 lakh crore, as of September 17, from Rs 2.10 lakh crore a year ago, as per the latest data.In July, the department had initiated a large-scale verification across multiple locations targeting individuals and entities facilitating fraudulent claims of deductions and exemptions in their income tax returns.
During a recent nudge campaign, taxpayers withdrew claims of tax deductions worth Rs 963 crore and paid Rs 409.50 crore in additional taxes, as of June 18, while a total of 30,161 taxpayers declared foreign assets worth Rs 29,208 crore and foreign income of Rs 1,089 crore.
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