Tax Refund Scam: Hyderabad Techies Fraudulently claimed Rs.110 Crore via making fake Donations to Political Parties:

Tax Refund Scam: Hyderabad Techies Fraudulently claimed Rs.110 Crore via making fake Donations to Political Parties Several city-based information technology experts have come under scrutiny by the income tax department after being identified as "top donors" to registered unrecognised political parties. However, techies' newfound interest in politics has turned out to be a matter of financial gain by abusing Section 80GCC of the Income Tax Act, which enables deductions for contributions to parties. An Income Tax Department probe unearthed a Rs.110 crore refund scam in which city IT professionals from 36 companies claimed tax refunds in the name of political donations they never made. One example that piqued the investigators' interest included an IT employee earning Rs.46 lakh who claimed to have donated Rs.45 lakh to a party. In certain cases, these political parties collected donations by cheque or bank transfer only to return the funds in cash after deducting a commission. Previous investigations revealed frauds in house rent allowance (HRA), education loans, and home loan interest claims. In 2023, a crackdown in Telangana and Andhra Pradesh targeted government employees who made bogus refund claims. The focus has now switched to private sector personnel. Investigators made a significant breakthrough when they tracked down a common email address shared by many IT employees who filed fraudulent returns. The identical amount was then misrepresented as a tax-deductible donation. RUPPs engaging in this initiative were found in Gujarat, Telangana, and other states. Some political parties linked to these funds have never run in an election or even submitted contribution records to the Election Commission of India. The department intends to review tax returns from the financial years 2021-22 to 2023-24 and instruct taxpayers to withdraw wrong claims. It would send notices to employees disputing the legality of their refund claims and explaining why deductions should not be denied. Furthermore, taxpayers who claimed deductions under Section 80GGC would get SMS and email alerts pushing them to reconsider their returns. If they filed false claims, they must file an updated return (ITR-U) by March 31, 2025, or face a 200% penalty, officials added. According to sources, numerous big technology companies are no longer processing deductions under Section 80GGC and instead opt for tax deducted at source (TDS). Employees, on the other hand, get around this by seeking refunds later on their own. At one big IT firm, 430 employees claimed deductions for Rs.17.8 crore under this clause. On average, employees received a refund of Rs.4.2 lakh. According to sources, the company played no role because the employees were in violation of the law. The IT department has now intervened to hold workshops at large IT and financial firms to warn employees against misusing Section 80GGC. Its investigation wing in Hyderabad conducted an outreach program at these companies on January 28, 29, and 30, urging staff not to submit fraudulent claims on their tax retunr.