Hyderabad techies ‘donate’ Rs 110 crore to political parties, claim rebates & take back donation

HYDERABAD: Several information technology professionals from the city have come in the income tax (I-T) department's crosshairs after emerging as "top donors" for registered unrecognised political parties (RUPPs). But the newfound love of techies for politics has turned out to be a case of fraud for financial gain by exploiting Section 80GCC of the Income Tax Act, which allows deductions for contributions to parties.An I-T department investigation uncovered a Rs 110 crore refund scam where city IT professionals from 36 companies had claimed tax refunds under the guise of political donations which they never made.One case that caught the investigators' attention was of an IT employee with a salary of ₹46 lakh who claimed to have donated ₹45 lakh to a party. In some cases, these political parties accepted donations via cheque or bank transfer only to return the amount in cash after deducting a commission.In previous investigations, frauds in house rent allowance (HRA), education loans and home loan interest claims were exposed. In 2023, a crackdown in Telangana and Andhra Pradesh targeted govt employees engaging in fraudulent refund claims. Now, the focus has shifted to private sector employees.A key breakthrough came when investigators tracked a common email address used by multiple IT employees filing fraudulent returns. The same amount was then falsely claimed as a tax-deductible donation. RUPPs involved in this scheme were traced to Gujarat, Telangana, and other states. Some political parties linked to these donations have never contested an election or even submitted their contribution reports to the Election Commission of India (ECI).The department plans to scrutinise tax returns from fiscal years 2021-22 to 2023-24 and instruct taxpayers to withdraw incorrect claims. It will be sending notices to employees questioning the validity of their refund claims and why deductions should not be disallowed.Additionally, taxpayer techies who claimed deductions under Section 80GGC will receive SMS and email alerts urging them to reassess their filings. If they had made false claims, they must file an updated return (ITR-U) before March 31, 2025 to avoid a 200% penalty, officials said.Sources revealed that several major tech companies are now not processing deductions under Section 80GGC and instead opting for tax deducted at source (TDS). However, employees are bypassing this by later claiming refunds independently. At one major IT firm, 430 employees claimed deductions amounting to ₹17.8 crore under the section. On an average, each employee received a refund of ₹4.2 lakh. Sources said the company had no role as the employees were caught on the wrong side of the law.The I-T department has now stepped in to conduct sessions at major IT and financial firms to caution employees against exploiting Section 80GGC. Its investigation wing in Hyderabad held an outreach programme on Jan 28, 29, and 30 at these companies where employees were urged not to make fraudulent claims in their tax returns.