Submitting fake rent receipts to pay lower taxes may no longer be an option. Taxpayers may be asked to produce proof of the supposed rent they have paid to claim House Rent Allowance.
According to a report in The Economic Times, the Income Tax Department can now seek evidence such as leave and a licence agreement, electricity or water bill, letter to the housing society, etc to prove that they are genuine tenants of the rented property. This is in compliance with the a recent tribunal order.
“The Income Tax Appellate Tribunal ruling has now laid down 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,” Dilip Lakhani, a senior tax adviser at Deloitte Haskins & Sells LLP, told The Economic Times.
Salaried workers receiving HRA from their employer have been able to claim a tax deduction on at least 60% of this amount with fake rent receipts.
“Technology and a stricter reporting system may make it easier for the (Income Tax) department...In case of HRA exemption, the assessing officer may crosscheck whether the address mentioned in the ITR [Income Tax Return] form is the same as the property on which rent is paid,” Lakhani said.