As the deadline for filing Income Tax returns approaches, authorities warn against using fake rent receipts to claim house rent allowance HRA deductions.
Only Genuine HRA Claims Allowed
According to the rules, you can claim an HRA deduction only if your employer pays you HRA. If you pay rent of more than Rs 1 lakh per year, you need to provide your landlord’s PAN number.
Avoid Submitting Fake Rent Receipts
Submitting fake rent receipts when filing your income tax return (ITR) is a serious offense. It can lead to heavy penalties and legal consequences. The Income Tax department uses artificial intelligence (AI) to catch these frauds.
How the Department Checks
The Annual Information Statement (AIS) Form and Form-26AS are matched with Form-16. The department matches the HRA amount claimed with the amount sent to the landlord’s PAN number. All transactions linked to the PAN are recorded in the AIS form. If there is a mismatch, the I-T department sends a tax notice.
If your company gives you HRA and you claim annual rent of less than Rs 1 lakh, you don’t need to provide the landlord’s PAN. You can claim HRA up to Rs 1 lakh without it being checked by the tax department.
Paying Rent to Relatives
Paying rent to relatives or immediate family members and claiming tax deductions is not considered fraud if you genuinely do so and have proof of the transaction.
Landlords should check their AIS periodically to see if any rent income is listed that they are unaware of. If they find an unexpected rent entry, they can alert the Income Tax department to dispute the transaction. This helps identify potential fake HRA claims.
Penalty for Fake Rent Receipts
Using fake rent receipts can lead to penalties and legal repercussions under Section 270A of the Income Tax Act, 1961.
Taxpayers may face penalties of up to 200 percent of the tax payable on underreported income. There is also the risk of tax fraud charges and increased tax liability for both the taxpayer and the landlord.
