Tax dept's AI tool 'not meant' for resolving political donation disputes
Delhi, Jul 8, 2025
TaxAssist should be used in 'simple cases' and professional advice in complex taxation matters is irreplaceable
The Income-Tax Department’s new AI-powered tool will help individual taxpayers, but for disputes relating to political donations or other such complex issues professional advice is irreplaceable, experts have said.
TaxAssist is useful in responding to tax notices and correcting errors in returns in “simple cases”. Political donations are a sensitive matter and undergo scrutiny to ensure transparency and prevent misuse of tax benefits. “The Income-Tax Department flags political donations to check for fraudulent claims and verify that they are not made using unaccounted money,” said Surajkumar Shetty, partner at JSA Advocates and Solicitors. He explained that false claims can attract penalties of up to 200 per cent of the evaded tax, along with interest and even prosecution in extreme cases.
Ritika Nayyar, partner at Singhania & Co, said donations are flagged if they appear disproportionate to the donor’s income or are made to unregistered entities. “Bogus or inflated donations, often used as a money laundering tool, are key grounds for suspicion,” she said.
What TaxAssist can and cannot do
TaxAssist uses artificial intelligence and data analytics to guide taxpayers in responding to notices and correcting errors in their returns. It offers automated alerts, identifies anomalies such as incorrect Section 80GGC claims, and walks users through filing corrections.
“TaxAssist is ideal for simple cases and new taxpayers. It helps in flagging mismatches and recommending corrections,” said Vishwanathan Iyer, senior associate professor of Finance at Great Lakes Institute of Management, Chennai. “But for high-value or complex matters, professional counsel is still necessary.”
Similarly, S R Patnaik, partner and head of taxation at Cyril Amarchand Mangaldas, advised caution. “TaxAssist is a useful initiative, but given its novelty and lack of a performance track record, taxpayers with nuanced cases should consult experts,” he said.
Documents you must keep handy
If you have made political donations, maintain documents. According to Iyer, taxpayers should keep:
-Official receipts from the political party or electoral trust
-Bank statements showing payment through non-cash modes
-Confirmation emails or acknowledgements from the recipient
-The political party’s PAN and registration details
Nayyar said: “Receipts should include the recipient’s and donor’s details, amount, date, and payment mode. Proof of payment through legitimate banking channels is essential since cash donations don’t qualify for deductions.”
Tax benefits under section 80GGC
Political donations made via non-cash modes qualify for a 100 per cent deduction under Section 80GGC for individuals and certain other entities, provided the donation does not exceed the donor’s total income.
“However, this benefit is only available under the old tax regime,” said Nayyar. Shetty added, “To avoid tax notices, report donations clearly in your ITR, ensuring the recipient is a registered political party or electoral trust.”
[The Business Standard]
