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ITR filing: Don't submit fake rent receipts! You may get income tax notice

The recent changes introduced in the income tax return (ITR) forms and Form 16 make it possible to electronically reconcile data submitted by taxpayers, and efficiently zero in on bogus claims

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ITR filing: Don't submit fake rent receipts! You may get income tax notice
Even if you are actually renting accommodation, failure to declare the same in your Form 16 will now spell an Income Tax Notice

Submitting fake rent receipts has hitherto been one of the most common tricks to cut down on one's tax outgo. But the Income Tax Department intends to crackdown on such malpractices starting this assessment year - the new ITR forms and the amended Form 16 are designed to ferret out fraudulent tax declaration proofs through computer-based processing. In case of any data mismatch, be ready for an income tax notice.

"Issuing of [the] new Form 16 is a good move and the major reason for all these changes is to ensure that Form 16 is in sync with the ITR form, which will help the Income Tax Department in electronically matching the data reported in ITR with all the data which it has gathered from various sources," Karan Batra, founder and CEO of CharteredClub.com, told The Financial Express.

The new ITR form has a drop down column where taxpayers need to give specific details of allowances. This was done to curb the practice of claiming tax exemption through allowances/reimbursement based on bogus/fake bills, and documents. Similarly, all allowances such as HRA, LTA, pension, leave salary and the like are now required to be reported in the Form 16 as separate items.

This amended format makes it possible for the taxman to electronically reconcile data submitted in the income tax return filed by employees. "If there is any item which is not disclosed in the manner prescribed, the Income Tax Department may not be able to reconcile everything and a notice may be issued electronically to explain the variance," Batra added.

For instance, some employees claim HRA benefit despite owning a house in the same city. Many others have been known to submit false information. Taking advantage of the Income Tax rule that there is no need to disclose the PAN of one's landlord for paying rent up to Rs 1 lakh per annum, many employees have hitherto claimed to pay a monthly rent of around Rs 8,300 in their ITR forms to claim the tax benefits on House Rent Allowance (HRA) but not declared the same to their employers.

That's because employers would require proof by way of rent receipts to include such information in the Form 16. But given that the Income Tax Department requires no submission of proof, all one had to do was submit false claims at the time of filing his/her ITR or simply pay a percentage of the tax saved to the person filing ITR on their behalf.

All this will be no longer be possible. Even if you are actually renting accommodation but your employer does not declare this in your Form 16, you are likely to get an Income Tax Notice. You will then have to submit rent receipts, rent agreement and bank statement to justify your claim. The last document is the most crucial evidence as it lays out the money trail provided rent is actually paid.

According to Batra, failure to give a convincing reply to the tax notice will not only spell huge penalties but the false claimant may also find previous benefits claimed reversed.

(Edited by Sushmita Choudhury Agarwal)

Also read: ITR filing: Who is eligible to file income tax return; last date, penalty, ways to do it

Also read: No changes in ITR forms, only software update to ease user experience, clarifies CBDT

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