Why is the I-T department sending SMSes to political donors?

“This appears to be a soft nudge from the tax department, likely targeting taxpayers who may have claimed deductions for fake donations or made errors in their filings,” said Nitesh Buddhadev, a chartered accountant and founder of Nimit Consultancy. “The message provides an opportunity to rectify any mistakes before stricter action is taken.”

No reporting mechanism

Donations to political parties are decidedly prone to misuse. Unlike donations to charitable trusts under Section 80G, in which the trust is required to file Form 10BD and disclose the details of the donors and the amounts donated, there is no such form or reporting mechanism under the Income Tax Act, 1961 for donations to political parties. 

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“This can be misused as the taxpayer simply needs to provide details such as the name of the political party, the donation amount, and the cheque or transaction number in his/her income tax return,” said Laxmi Ahirwar, a chartered accountant and Director, P. R. Bhuta & Co.

She added, “Under Section 29C of The Representation of the People Act, 1951, political parties are indeed required to file a contribution report to the Election Commission of India providing details of the contributions received over ₹20,000. However, the extent of compliance with this remains unclear.” 

Modus operandi of fake donors

Picture this. Mr A “donates” ₹10 lakh to a political party and claims a deduction. Let’s say he falls under the 30% tax bracket and saves ₹3 lakh of tax by doing this. But in reality, the donation never took place. Instead, the person on the other end simply took a commission – ₹1 lakh, say – and returned the remaining ₹9 lakh to Mr. A in cash. This way, he saved ₹2 lakh of tax that he was liable to pay under Section 80GGC. To be sure, donations made under Section 80GGC can be made only through a cheque or bank transfer – cash transfers are not allowed.

What should you do if you received this SMS?

If you’ve claimed a deduction under Section 80GGC and have proof, there’s no need to worry. However, if the claim was incorrect, there’s an option to rectify it by filing an updated return, known as ITU-R, and paying additional tax. Unlike a revised IT return, an ITU-R can only be filed to report a higher income.

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If an ITR-U is filed within 12 months from the end of the relevant assessment year, an additional 25% tax plus interest is payable. If filed within 24 months, the additional tax increases to 50%. Once it crosses 24 months, an updated ITR cannot be filed and you could face a fine of up to 200% of the tax amount.

In numbers

Prakash Hegde, a chartered accountant in Bengaluru, provided the following example. Say a fake donation of ₹4 lakh was claimed in the ITR for FY23 and the tax saving was ₹1,37,280. If an updated ITR was filed on or before March 2025 (12 months from the assessment date), the interest payable would be around ₹32,947. Therefore, the additional tax at 25% would be ₹42,557 (25% of ₹1,37,280 + ₹32,947), making the total payable amount around ₹2,12,784.

But if the updated ITR was filed in March 2026 (between 12 months and 24 months), the interest payable would be around ₹49,420. This means the additional tax would be ₹93,350 (50% of ₹1,37,280 + ₹49,420) and the total payable around ₹2,80,050. 

And if no updated ITR is filed and the tax authorities levy a penalty, it could be as much as ₹2,74,560 (200% of ₹1,37,280) which would be in addition to the tax ( ₹1,37,280) plus interest until it is paid.

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