Faking house rent receipts? Now, submit proof to claim tax deductions

The income tax department may soon be asking for proof from the taxpayer to check if he/she is staying at the rented property.

There may soon be trouble for those who have been using fake rent receipts to save income tax.

The income tax department may soon be asking for proof to check whether the taxpayer is staying at the rented property.

With the new system, tax authorities may soon be able to deny tax relief where house rent allowance (HRA) is claimed by fabricating bills.

According to a report in Economic Times, Dilip Lakhani, senior tax advisor, Deloitte Haskins & Sells LLP said, "The ITAT (Income Tax Appellate Tribunal) ruling has now laid down the criteria for the assessing officer to consider the claim of a salaried employee and if necessary question its justification. This will put the onus on the salaried class to follow the rules in availing the tax rebate."

The assessing officer can now ask for proof of rent agreement, letter to the housing society informing about the tenancy, electricity bill, water bill etc. from those claiming tax deductions for house rent allowance, the report said.

ALSO READ: Aadhaar could soon be mandatory for domestic flights

ITAT Mumbai had recently struck down the HRA exemption claim of a salaried individual for rent paid to her mother.

In this year's annual budget, the Finance Minister had proposed that those who are claiming a House Rent Allowance (HRA) of more than Rs 50,000 per month will have to deduct tax at source at the rate of five per cent.

The TDS will have to be deducted on the last month of the year in which rent is paid or last month of tenancy .

From Government perspective this amendment would ensure that there are no revenue leakages on account of such rental income. This will also discourage people who were claiming the HRA deduction fraudulently quoting wrong Permanent Account Number (PAN) of the landlord. Quoting PAN of the landlord was mandatory in case the rent paid during the year was more than Rs one lakh a year.