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Faking rent receipts to claim tax deduction under HRA? It will be difficult this time : India, News

Faking rent receipts to claim tax deduction under HRA? It will be difficult this time

The taxman can now ask you for proof of rent agreement, letter to the housing society stating that you are a tenant, electricity bill, water bill if you are claiming deduction under house rent allowance.

Highlights

  • Income Tax department to scrutinise rent receipts with greater rigour

  • The I-T department can ask you to show proofs such as rent agreement

  • Get PAN of your landlord if rent is more than Rs 8,333 per month

We all have, at some or the other point in time, submitted fake rent receipts to our employers to claim deductions under House Rent Allowance.

The Income Tax department, however, will now scrutinise receipts submitted under HRA with greater rigour and may ask you to provide more proof to show that you are staying in the accommodation.

The stricter stand on HRA deduction comes after the Income Tax Appellate Tribunal (ITAT) in Mumbai recently struck down the claim for HRA exemption of a chartered accountant who paid rent to his mother.

The ITAT bench came down heavily on the chartered accountant and said that claims under Section 10 (13A) of the Income Tax Act cannot be based on fake transactions.

The taxman can now ask you for proof of rent agreement, letter to the housing society stating that you are a tenant, electricity bill, water bill if you are claiming deduction under house rent allowance.

If you are a salaried individual, you can claim house rent allowance which can be partially or completely exempted from taxes.

The tax deduction on HRA is the amount that is the minimum under these three options: 1) actual HRA that you get; 2) 50 per cent of your basic salary and dearness allowance if you are living in a metro (it is 40 per cent if you are living in a non-metro city); 3) actual rent paid by you is 10 per cent of the salary.

If you are paying a rent that is above Rs 8,333 per month, do obtain the PAN number of your landlord to claim exemption. This allows the taxman to check if your landlord has provided the details of the income from house rent in his/her tax return.

Source

http://indiatoday.intoday.in/story/fake-rent-receipts-to-claim-hra-reduction-to-get-tough/1/921786.html

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