CBDT NUDGEs Taxpayers against Bogus Donation Claims – Legal Framework, Risk Areas and Professional Guidance

1. Background

In recent years, the Income-tax Department has significantly strengthened its data analytics and risk-based compliance framework to curb tax evasion and non-genuine claims. One such initiative is the ‘NUDGE’ campaign launched by the Central Board of Direct Taxes (CBDT), aimed at encouraging voluntary compliance by alerting taxpayers about potentially incorrect claims in their Income-tax Returns (ITRs).

The latest phase of the NUDGE campaign communicated through official press release dated 13.12.2025, focuses on bogus donation claims, particularly under sections 80G, 80GGC and related provisions, for Assessment Year 2025-26 and earlier years. This Article analyses the campaign, its purpose, risk indicators, and the responsibilities of Taxpayers and Chartered Accountants.

2. Purpose of the CBDT NUDGE Campaign

The NUDGE campaign is a taxpayer-friendly, pre-enforcement initiative wherein the Department uses third-party data, intelligence inputs and advanced analytics to identify high-risk or suspicious claims and nudges taxpayers to correct them voluntarily.

The current campaign has been triggered due to large-scale detection of:

Bogus donations to charitable institutions, and
Fake political contributions to Registered Unrecognised Political Parties (RUPPs)

claimed with the objective of reducing tax liability or obtaining unjustified refunds.

3. Statutory Provisions involved

3.1 Section 80G – Deduction for Donations to Certain Funds or Institutions

Section 80G allows deduction for donations made to specified funds, trusts and institutions, subject to:

Valid registration/approval of the donee,
Fulfilment of prescribed conditions,
Proper documentation and mode of payment.

Any donation made to a non-genuine, non-operational or unapproved entity does not qualify for deduction.

3.2 Section 80GGC – Deduction for Contributions to Political Parties

Section 80GGC allows individuals to claim deduction for contributions made to:

Registered political parties, or
Electoral trusts.

However, donations to Registered Unrecognised Political Parties (RUPPs) which are:

Non-filers of returns,
Non-operational at registered addresses, or
Not engaged in political activity,

have emerged as a major area of abuse and scrutiny.

3.3 Section 139(5) and Section 139(8A) – Revised and Updated Returns

The NUDGE campaign encourages taxpayers to:

File revised returns under section 139(5), or
File updated returns under section 139(8A),

to withdraw incorrect claims and pay taxes due with applicable additional tax, thereby avoiding penal consequences.

4. Departmental Findings and Risk Indicators

Based on enforcement actions and data analysis, the Department has identified the following risk patterns:

Large or repetitive donation claims disproportionate to income
Donations to entities flagged as suspicious or non-compliant
Donations routed through intermediaries or agents
Claims supported only by receipts without independent verification
Sudden spike in donation deductions compared to earlier years

Evidence gathered during search and survey actions has revealed that several such entities were allegedly used as conduits for routing funds, issuing bogus receipts and facilitating hawala transactions.

5. Communication Mechanism – SMS and Email Advisories

As part of the NUDGE campaign:

SMS and email advisories are being sent from 12th December 2025 to such taxpayers on their registered mobile numbers and emails.
The communication alerts taxpayers about potentially incorrect donation claims.
Taxpayers are advised to verify the genuineness of claims and take corrective action where required.

This approach reflects a shift from post-assessment enforcement to preventive and participative compliance.

6. Consequences of Bogus Donation Claims

Taxpayers who continue to claim non-genuine deductions may face:

Disallowance of deduction during assessment or reassessment
Demand of tax along with interest under sections 234A, 234B and 234C
Penalty proceedings for under-reporting or misreporting of income
Initiation of prosecution proceedings in certain cases

Further, intermediaries involved in facilitating such claims are also being proceeded against separately.

7. Exercise of Due Diligence

Chartered Accountants and tax professionals play a critical role in ensuring compliance. It requires:

Verification of registration status and approval of donee institutions
Cross-checking donation details with official records and portal disclosures
Advising clients on risks associated with accommodation entries
Encouraging voluntary correction through revised or updated returns

Failure to exercise due care may expose both taxpayers and intermediaries to regulatory and reputational risks.

8. What Taxpayers need to do

Taxpayers who have received NUDGE communications should:

Re-examine donation claims carefully
Verify genuineness and eligibility of donee entities
Withdraw incorrect claims without delay
File revised or updated returns, as applicable
Pay tax due and additional tax to mitigate exposure

9. Summary

The CBDT’s NUDGE campaign on bogus donation claims signifies an important evolution in India’s tax administration—from enforcement to engagement. While the law continues to provide legitimate tax incentives for genuine philanthropy and political contributions, misuse of these provisions is being systematically addressed through technology-driven oversight.

Taxpayers and professionals must align with this approach by voluntarily correcting errors .