Claiming HRA Tax Exemption? You may get a TAX NOTICE


(Last Updated On: August 28, 2019)
You already know Submitting Rent receipts to HR can help you save taxes. But, what you may not know is that submitting a fake rent receipt can put you in trouble with Tax Department.

How?
Let me explain, a recent judicial pronouncement has given powers to your Assessing Officer to check all your documents to see whether the HRA claimed by you is genuine or fake.

So, what we do to avoid such situation?
In this blog post, we are going to tell you the correct way of claiming HRA exemption. To help you enjoy tax exemption and at the same time save yourself from future notices and penalty from Income Tax Department.

Here’s how you can legitimately claim HRA tax exemption-

Reside in that house :

Employer gives you HRA to help you meet costs of accommodation. Government gives you tax exemption of almost 60% to help you save more money.
So, be honest if you are claiming HRA tax exemption, then reside in that house.
But,if you have your own house and still have HRA as a component in your salary. Then, in such a situation talk to an expert to help you plan your taxes.

Avoid payment in cash:

Become cashless. As far as possible do not pay rent in cash. Even if you are paying electricity and water bill, we  suggest you to pay  through bank . Keep safe the copies of water ,electricity bill & rent receipts. But if you still have to pay in cash then put a stamp of Re 1 on the rent receipt.

Pay TDS on rent:

If you pay monthly rent of Rs. 50,000/- or more then from June 2017 you need to deduct TDS on payment and pay to government treasury.

Have Your Documents in place:

One thumb rule when dealing with money is keep your documents ready. Whenever you take a house on rent, take one step further 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 increasing 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.

Click here to know how much HRA tax exemption you claim.

I paid rent to my parents, and even submitted rent receipt to HR to avail tax exemption. Will I get a tax notice?

Not necessary. If you have been genuinely paying rent to your parents. It is advisable to have a rent agreement in place. Also, your parents need to show rental income from you at the time of filing their income tax return.

Got more questions? You can look for answers in our widely researched FAQs on claiming HRA exemption.

Still need CA Assistance?We would be happy to help!

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.