CBDT Urges Taxpayers To Correct Ineligible Deduction Claims Before December 31

The Central Board of Direct Taxes has asked taxpayers to voluntarily review and correct ineligible deduction claims before December 31, according to a recent report by the Financial Express, as the Income Tax Department looks to tighten compliance while reducing friction around refunds and assessments.

The advisory is part of the department’s ongoing outreach under its NUDGE framework, which uses data already available with the tax authorities to flag possible errors in income-tax returns. Instead of initiating scrutiny proceedings straightaway, the department is nudging taxpayers to re-examine their filings and make corrections on their own where mistakes have crept in.

Officials said the communication is being sent only to selected taxpayers whose returns show potential inconsistencies. These messages are reaching taxpayers through emails and text alerts, highlighting areas where deductions or exemptions claimed may not be permissible under the law.

What Prompted The Advisory

According to the department, a growing number of returns filed for the current assessment year contain deduction claims that do not appear to match eligibility conditions or third-party information. In several cases, taxpayers have claimed deductions they are not eligible for, while in others, information reported by employers, banks, or other institutions does not tally with the figures disclosed in the return.

Officials said mismatches are being seen most often in donation claims, certain investment-linked exemptions, and returns where the refund amount appears unusually high. Officials said such issues often arise from a misunderstanding of tax provisions, incorrect documentation, or reliance on incorrect advice rather than deliberate intent to evade tax.

The CBDT has clarified that taxpayers who are confident that their claims are correct and fully supported by documents are not required to take any action. The outreach, officials stressed, should not be seen as a notice or accusation, but as an opportunity for taxpayers to revisit their filings while revision is still legally permitted.

Why The December 31 Deadline Matters

December 31 is the last date for filing revised returns for the relevant assessment year. Taxpayers who identify errors and file a revised return within this window can regularise their tax position without additional penalties, apart from paying any tax that may be due.

Those who miss the deadline will still have the option of filing updated returns in later months. However, updated returns generally involve extra tax, interest, and statutory charges, making them a more expensive route compared to timely revision.

The department has also acknowledged that a portion of the refund delays this year can be traced back to ineligible or mismatched claims. When a return is flagged by the system for discrepancies, refunds are typically held back until the issue is resolved. Voluntary correction, officials said, can help speed up processing and avoid prolonged back-and-forth.

With the tax administration increasingly relying on data analytics, inconsistencies are now being identified much earlier in the process. Information reported by employers, financial institutions, and other reporting entities is routinely matched with individual returns, leaving little room for errors to go unnoticed over time.

Tax professionals say the advisory serves as a timely reminder for taxpayers to go through their returns carefully, especially where deductions are concerned. Even small mistakes, if left uncorrected, can snowball into larger compliance issues later.

The message from the tax department is straightforward: where genuine errors exist, it is better to correct them now, while the window is open, than deal with higher costs and scrutiny at a later stage.