Quick Summary
Many taxpayers are misusing ITR only to claim refunds on TDS from salary, winnings or other income, viewing it as "refund-taking machine" and this behaviour is likely to result in strict scrutiny and income tax notices in 2025. A large number of people are filing Income Tax Returns with an aim of
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Some taxpayers are filing Income Tax Returns with the primary aim of obtaining the largest possible refunds, even if these claims are not genuine according to the Income Tax Act. They are essentially misusing the ITR process to claim refunds on TDS from salary, winnings, or other income.
Misusing ITR for refunds can lead to stricter scrutiny, automated or manual checks, and potentially demand notices, penalties, and further questioning from the tax department. The department is flagging returns with unusually high deductions or refund amounts for deeper verification.
The tax department uses data analytics and aggressive matching of information from AIS/26AS. If details in the ITR do not align with official records like Form 26AS, TDS/TCS statements, bank account details, or PAN-Aadhaar linking, the system can automatically trigger a notice.
Misuse includes claiming excessive TDS refunds, incorrect deductions, or inflated losses solely to increase the refund amount. This is particularly risky if taxpayers lack proper documentation or a genuine tax position to support their claims.
To avoid penalties, taxpayers should revise their ITR immediately if claims are not genuine, check their AIS for any mismatches (e.g., in winnings or high-value transactions), file the correct form, report all income sources accurately, and claim only allowable and documented deductions and exemptions. The deadline for revision is 31 December 2025.
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