Taxpayers can control their tax affairs by submitting accurate documents and not underreporting their income or evading tax payments.
The unfortunate practice of some individuals submitting fake rent receipts to claim tax exemptions has caught the attention of the Income Tax Department, leading to an investigation.
The department has identified some individuals and issued notices under Section 10(13A) of the Income Tax Act to verify their tax exemption claims.
Rent receipts are documents the landlord provides to the tenant as proof of rent payment. They are essential for claiming tax deductions on House Rent Allowance (HRA) provided by the employer.
However, some individuals have been creating fake rent receipts to fraudulently claim HRA benefits, which is illegal and can result in severe consequences if caught.
Rent receipts, serving as proof of rent payment, not only facilitate tax exemptions under HRA but also provide tenants with a sense of security in case of disputes.
This is especially crucial if the rent exceeds Rs 1 lakh in a financial year. Under Section 80GG of the Income Tax Act, individuals who do not receive HRA can also claim rent deductions if the amount paid exceeds the prescribed limit.
The Income Tax Department uses advanced technology to scrutinize taxpayers’ filings. If there are doubts regarding HRA claims or any other deductions, the department may issue legal notices to the concerned taxpayers, requiring them to provide appropriate proof. Failure to provide valid evidence may result in the disallowance of the claimed deductions.
Submitting fake rent receipts can lead to severe penalties and legal action. Under Section 270A of the Income Tax Act, taxpayers can be fined up to 50% for understating their income.
Additionally, interest may be payable under sections 234A, 234B, and 234C on the exempted amount. The Income Tax Department also has the authority to impose a penalty of up to 200% of the applicable tax on willful understatement of income.
Therefore, it is crucial for taxpayers to accurately report their income and refrain from submitting fake documents.