Submitting fake rent receipts? Beware! Here's how income tax department can catch you

ITR Tips: January is very important for salaried people in India. In this month, companies ask for investment proof from their employees. They may be in the form of LICs, ELSS, other tax-saving schemes, tuition fee receipts or rent receipts.

On the basis of these documents, your company calculate your tax and deduct it from your salary for the next three months.

The final deduction is done by the Income Tax Department (I-T) Department, which may also give you a tax refund. 

While giving investment proof, some people submit fake rent agreement and rent receipts to save more tax. If you are also thinking of doing something like this then just wait. The I-T department can catch you.

For the last many years, many people have been saving taxes in this way.

The Income Tax Department is also noticing it and has now started cracking down on such illegal practices.

The Income Tax Department has started sending notices (IT Notices) to those who claim tax deduction by submitting fake rent receipts since last year.

Now the question arises that how is this happening? How the I-T department knows that a particular rent receipt is fake or genuine.

What I-T Department does

In the era of Artificial Intelligence (AI), the Income Tax Department is also using AI to detect fake rent receipts.

For this, AIS Form and Form-26AS are matched with Form-16.

Let us tell you that all the transactions related to PAN card are recorded in these forms.

When a taxpayer claims House Rent Allowance through rent receipt, the Income Tax Department matches their claim with these forms and if they find any difference, they become alert.

PAN number key to detection

There is a rule related to House Rent Allowance that one can claim deduction of HRA only if they are getting HRA from the company.

If the employee pays more than Rs 1 lakh as rent, they will also have to provide the PAN number of their landlord.

With this, the Income Tax Department matches the amount claimed under your HRA with the amount sent to your landlord's PAN number.

Let us tell you that all transactions related to PAN are written in AIS form.

If a difference is found between the two, a notice is sent to you from the I-T Department.

If your company gives HRA and you are claiming annual rent of less than Rs 1 lakh, you will not have to provide the PAN of your landlord.

That is, in this situation, you can claim HRA up to Rs 1 lakh, which will not be checked by the I-T Department.

What if the rent is paid in cash?

Whenever it comes to avoiding the I-T Department, the first thought that comes to mind is to do transactions in cash.

Let us assume that you have replied to the notice of the Income Tax Department by saying that the difference between the rent receipt and the landlord's PAN transaction is because you paid the rent in cash or some part of it in cash.

In such a situation, the I-T Department can also send a notice to the landlord asking for their reply, and it is possible that their tax liability may increase if they tell the truth.

In such a situation, you may also be accused of fraud. It is better to avoid fake rent receipts.

Why people violate HRA rule

The biggest reason for fraud regarding HRA is that a lot of tax can be saved through it.

Suppose you have shown the rent of your house for Rs 20,000 per month i.e. Rs 2.40 lakh per year, you will not be directly taxed on this amount provided that you are getting HRA of at least Rs 2.40 lakh from the company.

However, if you have paid less rent then it, you do not get a claim on the entire amount.

In such a situation, many people think that they can save tax by making fake rent receipts, but now the Income Tax Department is catching these frauds and sending notices.