Fake rent receipt won’t help you to claim tax deduction

People who are using fake rent receipt to save taxes on income tax may be in trouble now.Submitting fake rent receipt to your company’s human resources can put you in trouble with income tax department.A salaried employee receiving “house rent allowance” from the employer could escape paying tax on at least  60% of this amount by generating fake rent reciept.

The income tax department now has good reason to insist on proof from the taxpayer showing that he is indeed a genuine tenant,staying in the property in question.The income tax department may soon be asking for proof to check whether the taxpayer claiming tax deduction under HRA is staying at the rented property.

The tax deduction on HRA is the amount that that is the minimum under these three options:

• Actual HRA that you get.
• 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).
• Actual rent paid by you is 10 percent of the salary.

Till now, to avail of the benefit, the PAN of the owner of the residence was one needed in case the rent is above Rs 1 lakh per annum.But now the official can ask for proof even if it is below Rs 1 lakh.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 percent.

According to a recent tribunal ruling the assessing officer can now demand proof-such as leave and licence agreement,letter to the co-operative society informing about the tenancy,electricity bill,water bill etc.- in allowing a lower taxable income as computed by a salaried employee.In case of HRA exemption, the assessing officer may crosscheck the address mentioned in the ITR form is the same as property on which rent is paid.

Become cashless.As far as possible do pay rent in cash.Even if you are paying electricity and water bill,we suggest you to pay through bank.Preserve the copies of water,electricity bill and rent receipts.But if you still have to pay in cash then put a stamp of Re 1 on the rent reciept.This documentation is a must while claiming HRA.Whenever you take a house on rent,take one step furthur and sign a rent agreement with your landlord.Ensure all the details of your terms with your landlord  should be stated very clearly in the agreement.

Claim correctly in your income tax return.

The tax department is increasingly leveraging technology to keep a watch on tax-payers.In case you had claimed fake HRA,then avoid trouble at the time of filing your income tax return.So when you are filing your income tax return pay the tax that you had saved under the curtain of fake rent receipt.