ITR-U Filing Alert
ITR-U Filing Alert The Income Tax Department has issued a warning to taxpayers regarding claims under Section 80GGC for donations to political parties. Many taxpayers, including salaried individuals, have received SMS alerts advising them to verify their claims and file an Updated ITR (ITR-U) by March 31, 2025, if any discrepancies exist.
This blog explains the issue, the risks of incorrect deductions, and the steps you must take to comply with tax regulations.
Understanding Section 80GGC – Political Donations Deduction
Section 80GGC of the Income Tax Act, 1961 allows taxpayers (excluding companies) to claim a 100% deduction for donations made to a registered political party or electoral trust. ITR-U Filing Alert The deduction is available only if the donation is made via non-cash modes, such as cheque, UPI, or bank transfer.
Who Received the Income Tax Department’s Warning SMS?
The tax department is sending warning SMS alerts to taxpayers who claimed deductions under Section 80GGC in:
- Assessment Year (AY) 2022-23 (Financial Year 2021-22)
- Assessment Year (AY) 2023-24 (Financial Year 2022-23)
- Assessment Year (AY)2024-25 (Financial Year 2023-24)
Taxpayers are being asked to verify whether their political donation claims were genuine. If a mistake was made, they are advised to file an Updated ITR (ITR-U) by March 31, 2025 to correct the discrepancy.
Why is the Tax Department Scrutinizing Political Donation Claims?
Many taxpayers in the past have falsely claimed donations under Section 80GGC to reduce taxable income and obtain refunds. ITR-U Filing Alert The tax department has increased compliance checks, and cases of incorrect claims are now under scrutiny. If discrepancies are found, heavy penalties and legal consequences may follow.
Consequences of False Political Donation Claims
If you have incorrectly claimed deductions for political donations, you may face:
- 200% Penalty: Under Section 270A, a penalty of 200% of the tax amount that escaped assessment may be levied.
- Prosecution Risk: Under Section 276C, tax evasion can lead to legal action.
- Notice for Scrutiny: Taxpayers may receive notices under Section 148 for income reassessment.
- Denial of Deduction: If a claim is found to be false, the deduction will be disallowed, and additional tax with interest will be charged.
Case Studies of Taxpayers Caught in Political Donation Fraud
Case 1: Scrutiny Assessment Pending Before CIT (Appeals)
A taxpayer earning Rs. 40 lakh per annum claimed deductions of Rs. 15 lakh for political donations and Rs. 7.5 lakh for charitable contributions in AY 2024-25. ITR-U Filing Alert After scrutiny under the Faceless Assessment Scheme, the taxpayer withdrew the political donation claim, paid additional tax and interest, and had to appeal against the assessment.
Case 2: 200% Penalty Imposed for False Claims
A Chartered Accountant confirmed that two clients who claimed bogus political donations in previous years received assessment orders imposing a 200% penalty. Another two clients received SMS alerts on January 28, 2025, warning them to file ITR-U.
How to File ITR-U if You Incorrectly Claimed Political Donations?
If you mistakenly claimed a deduction for political donations under Section 80GGC, follow these steps to file ITR-U and correct your return:
- Login to the Income Tax e-filing portal (https://www.incometax.gov.in/iec/foportal/)
- Select ‘File Updated Return’ (ITR-U)
- Choose the Assessment Year (AY 2024-25 or AY 2025-26)
- Select the reason for updating the return (Incorrect deduction claimed under Section 80GGC)
- Calculate additional tax liability
- Pay the applicable tax penalty (25% if updated within 1 year, 50% if updated within 2 years)
- Submit ITR-U before March 31, 2025
Documents Required to Substantiate Political Donations
To justify your Section 80GGC claim, ensure you have the following documents:
✅ Donation Receipt from the political party or electoral trust, including:
- Name of the party/trust
- PAN of the recipient
- Mode and amount of donation
- Date of donation
✅ Proof of Payment:
- Bank statements reflecting the transaction
- Copies of cheques or UPI confirmations
✅ Party Registration Proof:
- The political party must be registered under Section 29A of the Representation of the People Act, 1951.
Key Takeaways & Final Advice
✔ If your claim was genuine, ensure you have all supporting documents to defend your claim in case of scrutiny. ✔ If you mistakenly claimed the deduction, file an Updated ITR (ITR-U) before March 31, 2025 to avoid penalties. ✔ False claims can lead to 200% penalties and legal action, so avoid bogus deductions in future tax filings.
Stay Compliant, Stay Safe!
If you received the Income Tax Department’s warning SMS, take immediate action. Consult a tax expert if you are unsure about your claim. Avoid unnecessary tax penalties and safeguard yourself from legal consequences.
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