Income Tax Notices: The Income Tax Department is taking action against thousands of people who have claimed House Rent accommodation allowance via sending notices. Some people are also punished with hefty fines. The New Delhi Income Tax Department has begun implementing its action plan. The government offered numerous tax-saving measures under the old income tax regime.
In this regime, renting a home is also preferable option for saving tax. You must provide your company with a house rent receipt for this in February or March. Additionally, those who are employed also produce additional documentation.
Most often, it has been seen that people make false house rent receipts on their own and present them to their employer rather than requesting a receipt from the landlord. However, your cleverness is about to get you into a lot of trouble. Now, the Taxpayers are being asked for documentation.
To prevent this kind of fraud, the Income Tax Department uses specialized software. With the use of this software, it is now simple to identify fraudulent documents filed by taxpayers. Recent reports state that such people are receiving notices from the Income Tax Department. They are required to provide documentation relevant to tax exemption claims. These records are being looked into by the department in detail.
Strict measures are being taken by the Income Tax Department against forged documents
House rent receipts, receipts for employing workers to undertake official functions, and receipts for interest paid on mortgage are just a few examples of the fraudulent documents that the Income Tax Department is keeping an eye out for.
These notices are being delivered in accordance with Section 133(6) of the IT Act and pertain to the assessment year 2022–2023. The law gives the assessing officer the authority to inquire about specific details of transactions made during a specific time frame.
The Income Tax Department grants tax benefits on housing expenses to people in the salaried class in accordance with Section 10(13A) of the IT Act.
According to this law, you must present the landlord’s PAN card if the rent for your home is higher than Rs 1 lakh per year to your employer.
There is no requirement to provide the landlord’s PAN if the rent is less than Rs. 1 lakh. People generate fictitious House Rent Receipts in such circumstances, displaying rent of less than Rs. 1 lakh, in the names of their friends and relatives.
The Income Tax Department has also observed another sort of fraud at the same time, in which homeowners who are also claiming tax exemptions by providing house rent slips. The Income Tax Department’s computer data check has identified these individuals, and as a result, notices are being prepared to be sent to them.
The CBDT’s Central Action Plan states that field officers are leveraging technology to broaden the tax base.
The greatest justification for rent-related fraud is the opportunity to significantly reduce taxes. If you have listed your residence for rent for Rs 20,000 per month, or Rs 2.40 lakh annually, you won’t pay direct tax on this sum. Also, provided that the employer is paying you a housing rent allowance of at least Rs. 2.40 lakh.
What’s the penalty in case of Fake HRA?
It constitutes income hiding if an employee presents fictitious reimbursement bills to lower tax obligations. The assessment officer (income tax officer) may launch an investigation in this situation. After that, the taxpayer must present evidence of the validity of the bills.
Penalties will be applied if false bills are discovered. Section 270A (1) permits a penalty of up to 50% for underreporting income. A punishment of up to Rs 200 may be imposed on someone who willfully submits phony bills and provides false information about their income.