Hyderabad IT Professionals Booked in Widening Political Donation Tax Scam

In an astonishing development, more than 400 IT professionals in Hyderabad are under investigation by the Income Tax Department for allegedly making false or exaggerated political donation claims to receive illegal tax deductions under Section 80GGC of the Income Tax Act.

What started as a few individual cases has now grown into one of the biggest tax deduction scams in the country. The investigation has found that many salaried people, mostly software engineers, highlighted donations of equal to or greater than their gross salary per year. In Hyderabad alone, a February 2025 investigation revealed a INR 110 crore scam of employees in 36 technology companies.

Section 80GGC allows the legal recognition for individuals to get deduction for any donation given to political parties, without limit. Nevertheless, tax officers found numerous posts claiming donations under 80GGC that were not real. In many cases, cheques were issued to fictitious entities pretending to be political parties and the money was returned in cash and the corresponding donation was falsely reported in their tax return to receive large refunds.

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This practice which officials describe as “identity laundering through political donations,” falls within a larger national trend. Hyderabad is now joining Mumbai, Delhi and Bengaluru in an ongoing investigation into the fraudulent usage of 80GGC provisions. Across India, INR 10,000 crore was claimed in deductions in a single year.

With donation to income ratios up to 100% alarm bells have started to ring. In just Telangana and Andhra Pradesh, authorities have identified 400 high risk cases between FY 2023 and 2025 involving suspicious political donation claims. Nationally 6.5 lakh taxpayers are reported to be under scrutiny and 30 suspicious entities are under investigation.

In an effort to combat misuse, the IT department has increased the period for correction of income tax returns and started awareness drives in tech companies. Officials are encouraging individuals to correct false declarations before stricter enforcement begins.