Income-Tax Department unearths Rs 5,500 Cr donations racket

A nationwide investigation by the Income-Tax (IT) Department into Registered Unrecognised Political Parties (RUPPs) has unearthed a racket involving bogus political donations exceeding ₹5,500 cr, allegedly routed through 36 shell parties over three years, involving more than 1.6 lakh suspicious donors, sources told ET.

According to officials privy to the probe, the scheme involved round-tripping of funds, where money donated to these political parties was returned in cash to the original donors after deducting a small commission, allowing them to falsely claim deductions under Section 80GGC of the Income-tax Act. This, the officials said, resulted in massive losses to the exchequer running into thousands of crores.

"This often involves round-tripping, where funds are returned to the original donors who then claim fraudulent tax deductions, resulting in a direct loss of thousands of crores in tax," an official said.

On July 14, the department conducted a coordinated action across multiple regions, covering more than 150 premises linked to intermediaries, RUPPs, and professionals, including chartered accountants. The exercise exposed 1.53 L I-T returns claiming bogus deductions worth ₹4,478 cr.