Introduction
Over the years, the Old Tax Regime has been a preferred route for many taxpayers due to the bouquet of deductions and exemptions it offers. From Section 80C to HRA, taxpayers have long used these provisions to reduce their tax liability. However, this system has also opened doors for misreporting and fake claims.
But now, the government has taken a strong stance. With the Income Tax Return (ITR) forms for FY 2024-25, the Income Tax Department has added strict reporting requirements and auto-verification systems — making it nearly impossible to claim false deductions.
Let’s dive into the changes and how they are expected to weed out fake deductions under the old tax regime.
What Triggered the Crackdown?
For years, salaried individuals and self-employed taxpayers have exploited the Old Tax Regime, falsely claiming deductions for:
- Life insurance premiums never paid
- Rent without actual tenancy
- Mediclaim for non-existent policies
- Donations to unregistered trusts
According to CBDT data, a huge chunk of these claims went unchecked due to the self-declaration nature of ITRs. This led to a massive revenue leakage, prompting the government to strengthen the system.
Key Changes in ITR Forms for FY 2024-25
Here’s how the new ITR changes are hammering down fake deductions:
1. Pre-Filled Data Cross-Verification
- ITRs now come pre-filled with details sourced from Form 26AS, AIS, and insurance/pension providers.
- If a taxpayer claims a deduction that’s not backed by these sources, it raises an instant red flag.
2. Mandatory Disclosure of Insurer/Institution Details
-
For Section 80C (LIC, PPF, ELSS) and 80D (Mediclaim), the ITR form now asks for:
- Policy Number
- Insurer’s Name
- Premium Paid
- Mode of Payment
- Missing or incorrect information may lead to rejection of the claim.
3. Rental Deductions Under HRA Now Need PAN of Landlord
- Claiming HRA? You now must provide the landlord’s PAN if rent exceeds ₹1,00,000 annually.
- Dummy landlords or cash payments won’t work anymore.
-
The new HRA schedule in the ITR form with basic salary + DA, HRA received, actual rent paid, and indicate whether you're in a metro or non-metro location.
4. Donation (80G) Claims Matched with DARPAN/NGO ID
- ITR will now auto-match donation claims with the NGO’s 80G certificate & registration number.
- False donation entries won’t be allowed.
5. Increased Scrutiny & Automated Alerts
- The CPC-Bengaluru and AI-powered assessment systems are designed to flag inconsistent data.
- Mismatched deduction claims can now trigger automated queries, reassessments, or penalties.
Why This Matters to You
If you're still using the Old Tax Regime, this is a wake-up call.
- Double-check all your deductions.
- Maintain proofs of payment (receipts, bank statements).
- Don’t blindly follow your tax consultant or salary slips.
If you're unsure, consult a qualified Chartered Accountant who understands both the legal limits and digital scrutiny in today’s tax environment.
Should You Switch to the New Tax Regime?
The New Tax Regime, though lower on deductions, offers simpler compliance and lower scrutiny. If your deductions are limited, switching may offer:
1 .Lower tax outgo
2. Fewer compliance headaches
3. Zero fear of mismatched data
Pro Tip: Use the government’s Tax Calculator or consult us to make the smart choice.
Final Thoughts
The era of casual tax filing is over. The Income Tax Department has evolved into a tech-savvy, data-integrated system. With the latest changes in ITRs, especially under the Old Tax Regime, the message is clear: Fake deductions will not be tolerated.