Salary Refund Claims Under Lens: IT Dept Questions Employers

The Office of Assistant Director of Income Tax, Investigation, under the Income Tax Department, Ministry of Finance, had issued a notice dated June 17, 2025, for the purpose of collecting information under the subsection of Section 133(6) of the Income-tax Act, 1961.

This section gives power to the designated authority to collect relevant information from the concerned taxpayers in connection with the proceedings initiated under the Income Tax Act 1961.

The authority asked the taxpayer to disclose the following details:

The department stated that when the Income Tax Returns (ITRs) for the Financial Year 2022-23, furnished by a few government officials through your office, were examined/verified, they were all discovered to have some unusual or potentially suspicious deductions, exemptions, and expenses, leading to significantly high refund amounts.

When these claims were being verified by the tax department, it was noted that several officials working in your organisation seem to have claimed large refunds by using suspicious deductions or exemptions.

It is believed that the employer, after calculating the correct taxable income, had deducted tax at source (TDS) based on the information disclosed by the concerned employees through relevant documents. Now, the department is trying to examine/verify if the claims made are genuine. Hence, the department has asked the concerned authority to disclose relevant information.

Here, we can see these notices are now being issued directly to salary-disbursement offices instead of individual employees. This is an important and positive step because it checks deductions at the stage when they are actually given. By making employers verify deductions using proper documents, it helps stop employees from claiming false or exaggerated expenses.