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Stern Action Against HRA Fraud: Income Tax Department Utilises 'e-verification' System - Details

The emergence of such practices has prompted the Income Tax department to employ its 'e-verification' system, issuing notices to individuals suspected of misrepresenting rental expenditures. Through this compliance portal, authorities aim to rectify erroneous claims and ensure adherence to tax regulations.

Times Now Digital

Updated May 7, 2024, 19:22 IST

Crack Down on Fraudulent HRA Claims (Image Source: iStockphoto)

In an intensive effort to combat fraudulent claims, the Income Tax department has initiated rigorous measures targeting individuals exploiting House Rent Allowance (HRA) provisions. Numerous cases have surfaced where tenants are found to be exaggerating their rental expenses, triggering stern action from tax authorities.

Under the spotlight are instances where tenants claim HRA for rents surpassing Rs 1 lakh annually without furnishing landlords' PAN details, a mandatory requirement as per the law. However, tenants, often in connivance with unscrupulous elements, manipulate this requirement, leading to discrepancies between reported rents and actual payments.

According to The Times of India report, legal experts caution both tenants and landlords against the ramifications of fraudulent HRA claims. Despite landlords potentially being unaware of their PAN being misused, they could still find themselves entangled in legal complications. However, swift action and cooperation with tax authorities are recommended to mitigate liabilities.

Former chief commissioner of Income Tax, Ramakrishnan Srinivasan, sheds light on the arduous process landlords face to refute false claims associated with their PAN. The burden of proof often falls heavily on landlords, necessitating exhaustive efforts to vindicate themselves from tax liabilities stemming from misrepresented rental incomes.

Harsh Kedia, a seasoned chartered accountant, elucidates the Income Tax department's protocol in handling rent-HRA mismatch cases. Notices are dispatched to tenants for clarification on rental payments and landlords' PAN details, with subsequent investigations unfolding if suspicions of fraud persist.

Furthermore, Neeraj Agarwala, partner at Nangia Andersen India, underscores the gravity of rectifying erroneous HRA claims, emphasizing the potential tax implications and penalties if left unaddressed. He urges landlords to meticulously monitor their Tax Information Statements (TIS) and lodge grievances promptly to dispute unauthorized claims.

The report added that to safeguard their interests, legal experts recommend landlords adopt stringent measures such as maintaining comprehensive documentation, preferring electronic payment modes, and declaring income from vacant properties to forestall misuse of their PAN details.

The Central Board of Direct Taxes (CBDT), in a recent press release, reaffirmed its commitment to curbing fraudulent practices, underscoring the imperative for taxpayers to adhere to regulatory norms and maintain transparency in financial transactions.

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