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These Income Tax deductions and exemptions are often misused. Have you claimed any?

rajeev kumar
By Rajeev Kumar

3 min read | Updated on July 15, 2025, 13:12 IST

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SUMMARY

If you have also claimed any false deductions in the past, you can correct your mistake now by filing an updated ITR (ITR-U).

misused income tax deductions

The Income Tax Department is going after people who have misused tax deductions in past. | Representational image source: Shutterstock

Income Tax Department has identified certain deductions and exemptions that are often misused by taxpayers. These deductions are available under various sections of the Income Tax Act, 1961, and are currently allowed only under the Old Tax Regime.

"Analysis reveals rampant misuse of deductions under sections 10(13A), 80GGC, 80E, 80D, 80EE, 80EEB, 80G, 80GGA, and 80DDB," the Income Tax department said in a statement on Monday (July 14, 2025).

Let's have a look at what these sections are and what deductions they offer:

House Rent Allowance (HRA) exemption under Section 10(13A): Under this section, salaried individuals are allowed to claim an exemption from tax on HRA received if they are living in a rented accommodation (learn more about HRA here).
Section 80GGC: This section allows a deduction for donations made to political parties or electoral trusts. This deduction can be claimed only when donations are made in any mode other than cash.
Section 80E: This section allows deduction of the interest paid on education loans taken for higher education for self, spouse, children, or a student for whom the taxpayer is a legal guardian.
Section 80D: This section allows for a deduction on premiums paid for health insurance policies.
Section 80EE: This section allows an additional deduction on interest paid for loans taken for acquiring a first residential property. However, this deduction is not available for all taxpayers.
Section 80EEB: This section allows deduction of up to ₹1,50,000 per annum on interest paid on loans for buying electric vehicles between April 1, 2019, and March 31, 2023.
Section 80G: This section allows a deduction for donations to certain funds, charitable institutions, and NGOs.
Section 80GGA: This section allows a deduction for donations made to scientific research or rural development projects.
Section 80DDB: This section allows a deduction for medical expenses incurred for the treatment of specified diseases or ailments for oneself or dependents.

The tax department has found that many employees have claimed deductions under the above-mentioned sections without proper justification.

In doing so, many taxpayers were also lured by organised rackets operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions.

"Investigations have uncovered organized rackets operated by certain ITR preparers and intermediaries, who have been filing returns claiming fictitious deductions and exemptions," the Tax Department said.

"These fraudulent filings involve the abuse of beneficial provisions, with some even submitting false TDS returns to claim excessive refunds," it added.

Have you also claimed any false deductions?

If you have also claimed any false deductions in the past, you can correct your mistake now by filing an updated ITR (ITR-U). In case you find it difficult to file ITR-U on your own, you should seek help from genuine tax filers, preferably chartered accountants, to stay clear of any income tax hassles.
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About The Author

rajeev kumar
Rajeev Kumar is a Deputy Editor at Upstox, and covers personal finance stories. In over 11 years as a journalist, he has written over 2,000 articles on topics like income tax, mutual funds, credit cards, insurance, investing, savings, and pension. He has previously worked with organisations like 1% Club, The Financial Express, Zee Business and Hindustan Times.

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