If you or someone you know has claimed fake deductions or hidden income in their income tax return, there is now an urgent and final call to make things right. The Income Tax Department has issued a strong warning to all such taxpayers. The message is clear. Either come clean voluntarily through the ITR-U process or risk facing serious consequences including heavy penalties and possible prosecution.
The finance ministry recently revealed that thousands of taxpayers have been filing incorrect ITRs over the past four years. Many of these cases involve inflated deductions, underreported income, and misleading claims made in collusion with certain chartered accountants and tax consultants. According to recent data, over 40,000 taxpayers have already withdrawn false claims amounting to more than one thousand crore rupees after government advisories. These corrections were made using the ITR-U form, a facility designed to allow voluntary correction without triggering enforcement action.
The government has run an extensive outreach campaign, including SMS alerts and email notices, urging taxpayers to revise their returns if they made a mistake. While a good number responded, authorities believe many are still under the influence of schemes that promise high refunds using unethical means. Several tax filing centres and middlemen are now under the scanner. In fact, recent raids at 150 locations across the country uncovered fake bills, donation receipts, forged TDS certificates, and even cloned PAN numbers.
But instead of immediate punishment, the government has chosen to give people one last opportunity. The ITR-U or Updated Return is available for anyone who either missed filing their return or filed one with incorrect information. This updated return can be filed for any of the last four assessment years. For example, if you made a mistake in your return for the financial year 2020 to 2021, you have until March 31, 2026 to correct it.
There are costs involved depending on how late you file the updated return. If you submit it within twelve months of the end of the assessment year, you must pay the basic tax, applicable interest, and an additional 25 percent as penalty. If you file within twenty four months, the additional penalty goes up to 50 percent. And if you wait up to four years, you may have to pay up to 70 percent extra.
However, there is no option to claim a refund through this process. The ITR-U is purely a way to regularise your past records and avoid future trouble. The Central Board of Direct Taxes has also clarified that those who file corrected returns voluntarily before any official inquiry or detection will not face legal proceedings. But if the department uncovers the fraud first, the taxpayer may be subject to penalties, interest, and even a court case.
The larger concern is the growing web of fraudulent practices being enabled by unauthorized tax agents and consultants. These intermediaries lure clients with the promise of high refunds, often through illegal deductions under sections like 80GGC, 80E, or 80D. While the temptation of easy money may seem attractive, the consequences of getting caught are far more damaging in the long run.
The Income Tax Department’s message is simple. If you made a mistake, fix it now. The system is giving you a way out. But that door will not remain open forever.
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