ITR Filing 2025: 8 Common Fake Deduction Mistakes That Could Get You Penalized

As the deadline for ITR Filing 2025 draws near, the Income Tax Department has turned on high alert for fake deduction claims. With the rise in fraudulent filings, the department is now cross-verifying returns through Form 26AS, AIS (Annual Information Statement), and banking data.

Taxpayers who try to manipulate the system by claiming deductions without valid proof could face hefty penalties, prosecution, or both. If you're filing your return, it's crucial to know what not to do. Here are 8 common mistakes that may trigger scrutiny from the tax department.

1. Claiming Section 80C Deduction Without Investment

Many individuals falsely claim the entire ₹1.5 lakh deduction under Section 80C without making any real investment in instruments like ELSS, PPF, or LIC. However, the tax department now cross-checks investments via Form 26AS and AIS. Any discrepancy can lead to rejection of your return and penalties.

2. Falsely Claiming HRA Without Paying Rent

House Rent Allowance (HRA) deductions are meant for salaried employees who actually pay rent. But some people claim HRA without renting any property. The department now verifies this through landlord PAN details and bank transactions, making it easier to catch bogus claims.

3. Fake Claims Under Section 24(b) for Home Loan Interest

If you haven’t taken a home loan, but still claim interest deduction under Section 24(b), be prepared for trouble. In the absence of a valid loan statement, the deduction will be disallowed. The IT Department relies on loan account data from banks and NBFCs for verification.

4. Unverified Medical Expense Deductions

Taxpayers claiming deductions under Section 80DDB (for specified diseases) or 80U (for disability) must provide a valid medical certificate from a qualified doctor. Any medical-related claim without documentation is considered invalid and may invite a penalty.

5. Faking Education Loan Interest Under Section 80E

Some individuals try to reduce their tax liability by entering fake education loan interest details under Section 80E. The Income Tax Department can now directly verify such claims using bank-supplied education loan data. A false claim here can lead to serious consequences.

6. Fake Donations for 80G Deduction

Donations to NGOs or charitable institutions qualify for deductions under Section 80G, but some people fabricate donation receipts or donate to non-eligible entities. The tax department now checks the validity of the NGO and donation receipts, so fake donations will be caught.

7. Overclaiming Bank Interest Under 80TTA/80TTB

Sections 80TTA and 80TTB allow deductions up to ₹10,000 and ₹50,000 respectively on interest from savings accounts. But many people overstate this figure. The AIS system reflects exact interest earned, so any exaggeration can trigger a red flag.

8. Falling for Misleading Tax-Saving Advice

In an attempt to save taxes, some individuals follow the advice of unqualified agents or consultants, who recommend fake deductions or manipulated filings. But remember, the responsibility always lies with the taxpayer — and the penalty or punishment too.

✅ Key Takeaway: Be Truthful, Stay Compliant

Filing your Income Tax Return is not just about claiming deductions — it's about accuracy and transparency. With real-time data tracking from banks, employers, mutual funds, and even hospitals, the scope for misreporting is shrinking fast.

Avoid shortcuts, ignore fraudulent advice, and never claim what you can't prove. The risks of detection and penalty in 2025 are higher than ever before.