IT Department flags ₹1.29 lakh crore in foreign remittances linked to 6,422 entities for nationwide verification.
NEW DELHI: The Income Tax Department launched a coordinated nationwide verification exercise on August 18 targeting ₹1.29 lakh crore in outward foreign remittances flagged as suspicious, made by 6,422 entities during the second quarter of the current financial year. The department has initiated direct enforcement action against 394 entities suspected of being fictitious or shell companies, alongside scrutiny of 36 chartered accountants suspected of improperly certifying these transactions.
The exercise covers remittance activity spanning three financial years, from 2023 through 2026, though the immediate trigger appears to be a sharp and unusual acceleration in outflows. In just the first half of this financial year, outward remittances reached ₹43,048 crore, already amounting to 78% of the entire previous year’s total, a pace that set off automated risk flags within the department’s data systems.
Where the Money Went
Investigators found that the flagged capital was heavily concentrated in just a handful of destinations. Singapore, the UAE, Hong Kong, Mauritius and China together accounted for 72.3% of the total ₹1.29 lakh crore flagged for review, with Singapore alone receiving nearly ₹42,000 crore. A particularly notable finding involved 83 entities that had declared foreign addresses themselves, which together remitted ₹36,175 crore, raising questions about offshore structuring.
Ground-level checks conducted across multiple states revealed a consistent pattern among the 394 targeted firms. Many were non-filers of income tax returns or had reported minimal business turnover, yet were remitting crores abroad. Physical inspections at several registered addresses found no functioning business at all, while money from numerous unrelated shell companies was frequently traced to a tightly clustered set of foreign bank accounts, a pattern consistent with organised money-routing operations.
How the Transactions Were Dressed Up
To pass through standard banking checks, these remittances were classified under specific declared purposes. Investigators found ₹44,474 crore claimed as Long-Term Capital Gains, ₹27,128 crore filed under vague “other income” categories and ₹16,423 crore declared as freight charges. In several cases, entities with no fixed assets claimed massive capital gains payouts, while companies showing no actual goods trade filed enormous freight or consulting fee claims, discrepancies now under detailed audit.
How the Network Was Uncovered
The investigation traces back to an earlier raid on a network of fake charitable trusts that were issuing bogus donation receipts in exchange for unaccounted cash. Digital records seized during that operation revealed the illicit proceeds were being layered through corporate accounts and converted into foreign currency for transfer abroad. From there, the department used its Project SAKSHAM and Insight analytics platforms to cross-reference remittance certificates, bank wire reports and tax filing data, ultimately identifying the full network of 6,422 entities.
The Role of Chartered Accountants
A significant part of the probe centres on professional gatekeepers. Under tax rules, chartered accountants issuing the mandatory Form 15CB certification for foreign remittances are required to examine a remitter’s actual invoices, contracts and financial books before certifying a payment as tax-exempt. The department found that just 36 CAs had issued a disproportionately large share of these certificates to the flagged entities, apparently without verifying whether the companies had genuine operations at all, exposing them to potential penalties and disciplinary referral to their professional body.
What Happens Next
Entities that fail to establish legitimate business activity behind their remittances face a defined escalation path, starting with summons for financial records, followed by formal reassessment proceedings that could treat the outflows as unexplained income taxable at a steep effective rate. Cases involving suspected money laundering or hawala-style routing may eventually be referred to the Enforcement Directorate or prosecuted under the Black Money Act.
It’s worth noting that the ₹1.29 lakh crore figure represents transactions flagged for verification, not a confirmed tax demand. Genuine businesses making legitimate payments for imports, software licenses or consulting services would face no additional liability once their documentation is verified.
Part of a Broader Compliance Push
This enforcement drive runs alongside a separate, voluntary disclosure scheme launched just two days earlier, which gives individual taxpayers with modest undisclosed foreign assets a window to regularise their filings with reduced penalties. Together, the two initiatives reflect a calibrated approach, offering leniency to genuinely inadvertent small taxpayer errors while pursuing firm action against organised structures designed to move large sums out of the country under false pretences.
As the department moves from data flagging into formal verification and assessment, the coming months will determine how much of the ₹1.29 lakh crore ultimately proves to be legitimate commercial activity and how much represents capital that left India’s shores through fabricated paperwork.
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