Bogus Political Donations: The Income Tax Department has intensified its scrutiny of taxpayers who have claimed deductions for political donations under Section 80GGC. Messages are being sent to taxpayers who filed claims in Assessment Years (AY) 2022-23, 2023-24, and 2024-25, urging them to verify the validity of their claims. If a mistake or error is identified, taxpayers are advised to file an updated return (ITR-U) promptly to avoid severe penalties.
Background on Political Donation Scrutiny
This initiative by the department mirrors the actions taken for AY 2019-20, where a significant number of cases involving bogus political donations were reopened. In these cases, the donations claimed as deductions were disallowed, resulting in confirmation of tax liability along with penalties. The department’s approach highlights its zero-tolerance stance against fraudulent claims.
Read Also: Income tax notices sent to all involved in bogus political donation
Key Points for filing ITR-U
- Taxpayers have the opportunity to file an updated return (ITR-U) for AY 2022-23 by 31st March 2025.
- Filing the updated return will attract 25-50% additional tax penalty on the amount due based on when the ITR-U is filed.
- If the case is selected for assessment later, taxpayers face a 200% penalty of the tax due on the disallowed donation claim, along with the addition of the entire donation amount to their taxable income.
Implications for Taxpayers
For taxpayers who may have claimed bogus or unverifiable political donations, the risk of scrutiny and harsh penalties is high. Based on the department’s prior actions and current focus, the following measures are advised:
- Self-Verification: Review your filed ITRs for any political donation claims that may be unsubstantiated or incorrect. Ensure all claims are backed by valid receipts and documentation.
- Filing an Updated Return: If any discrepancy is identified, it is advisable to voluntarily file an updated return (ITR-U) to correct the error. Filing an updated return not only mitigates penalties but also demonstrates good faith.
- Act Promptly: Delaying action could result in the case being selected for assessment, leading to harsher penalties and prolonged litigation.
Read Also: ITR-U: Last date to File ITR for FY 2019-20, 2020-21 and 2021-22
Penalties for Misreporting Political Donations
- ITR-U Penalty:
- Filing within 12 months from the end of the relevant AY: 25% additional tax.
- Filing within 24 months: 50% additional tax.
- Under-Reporting and Misreporting Penalties:
- Under-Reporting of Income: 50% of the tax due on the under-reported amount.
- Misreporting of Income: 200% of the tax due, applicable in cases of bogus claims or fraudulent donations.
It is critical for taxpayers to proactively address any discrepancies in their filed returns. Filing an updated return provides a window of opportunity to rectify mistakes and reduce penalty exposure. As history has shown, cases selected for scrutiny often result in confirmed additions and maximum penalties. Therefore, taxpayers with questionable claims are strongly advised to act now.
The deadline for filing an updated return for AY 2022-23 is 31st March 2025. Avoid the risk of heavy penalties and legal complications by reviewing your tax returns and ensuring compliance.
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