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Fake Rent Receipts may land you in soup!

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I am sure all of us have done this one time or the other, especially employees to either save taxes / or for submitting it to the Employer for reimbursement of  House Rent Allowance, or HRA. Although, to be entitled for HRA, the employee should be staying in rented accommodation, most of them use Fake rent receipts. However, going forward you may not be able to get away with it – Infact, you may end up loosing your job – so beware.

As per a recent judgment by Honorable Mr. Justice Rajiv Sahai Endlaw of Delhi High Court an employee can be dismissed from service for producing Fake Rent Receipts.

Since housing is one of the fundamental needs for us, the government treats it sympathetically, and gives us various tax breaks towards it. The tax benefit on HRA is available under section 10 (13A) of the IT Act.

HRA - House Rent Allowance

In simpler terms, the whole of HRA is exempt from tax only if it is not in excess of 50% in the 4 metropolitan cities, and 40% in the case of other cities, and further if the rent paid is more than the total of HRA and 10% of the salary. Otherwise, the excess has to be added to the taxable income.

Was it simplified? Not quite so? Well, there are many HRA calculators available online and one such is readily available over here for our Trak readers – HRA Tax Calculator.

As per Income Tax Publications Rent Receipt is not compulsory for salaried employees drawing house rent allowance up to Rs.3,000 pm. But in the regular assessment of the employee, the Assessing Officer is free to make enquiry or request proof of payment of rent by assessee.

With the rise in Incomes and Rentals many salaried people are eligible for a much higher HRA, and there in lies the crux of the Proof Submission and verification.

Employers giving HRA to employees take in Rent receipts as proof in case of scrutiny. Employees also need to keep a copy of the same. There are other ways where in the ITO might get convinced that the Amount of rent being exempted is the amount which one is eligible for.

For example, through Bank Statements showing a transfer of the amount to the Owner or cheque numbers through which one is paying the rent. Many Employees tend to fake rent receipts to claim a higher HRA to reduce their Tax Outgo.

Apart from the HRA receipts, many cases have come where in the employees fake the Medical Bills and Leave Travel Concessions/Allowance amongst some. What is required is a set of clear guidelines to do away with such practices, I did hear that most of these allowances were supposed to go away in the Proposed Direct Tax Code, but haven’t heard of it in the draft proposal. It’s high time some measures are taken to prevent fraudulent claims and at the same time give adequate benefits to the salaried people.

Let’s wait and watch as to how the final DTC addresses these issues, if at all it does.

  1. Pardeep says

    “the government treats it sympathetically, and gives us various tax breaks towards it” , it’s hilarious!!

  2. Harsha Srivathsa says

    what if the hra is less than 5000, can we go ahead on receipts?

  3. Jayan says

    HI,
    Looks like some government loving guy has appeared.. How honestly can u say that for every single penny you have as taxable income, you have pain your taxes? If you have, well, good…you are proud to be a good citizen. Now, all such rules and regulations come into effect only for the common people, who find it difficult to meet ends of life. What about politicians and big players of industry? are they following these rules? How can one rent a computer for 80k when good computers are there for 25k( CWG scam). ? and how many million fake receipts and declarations have the politicians and industrialists made to eat all the taxes the common man has paid? so, before blaming the common man, write an article to make the leaders correct…

    1. Someone says

      I agree to Jayan… “government loving guy”

    2. Tony says

      Hi ,someone is frustrated…..? Article is published educate rather to support or favour someone who is fraud?

  4. Rajesh says

    My Land lord is not willing to give any Rent Receipt upon request.Even after informing about the Income Tax rules and other consequences.

    Since he is collecting the rent above the Rent control ACT norms,May be he might scared of that.

    What should i do ?

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    so plz give ur further inquiry detail or another querry
    with ur regard
    name : puneet shrivastava
    contact no . 09467929864
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  6. sheetal says

    Well yes this had to be stopped at some point of time because most of the people have been doing this since years even though they stay in their own house.

    1. Kutty1965 says

      Every employee is entitled to have a govt accommodation or HRA in lieu. If he is not allotted with a house he have no option but to take the HRA to compensate the rent he has to pay. If the deptt is insisting for a receipt and the owner is not giving it, he have no option but to manage one. If the unnecessary procedure of producing the receipt is done away, then no body will be running behind the receipt or managing it.  This is the only solution to the problem.  
      A word to you Sheetal, Even if somebody is staying in own house, please understand that he had spent a lot of money for it ; perhaps taken loan at high interest rate. You perhaps do not know the pain of making a house. He also could have rented his own house and stayed in the Govt house. In that case people like you will not do the moral spit on them. I pity on your opinion. Making a house and staying in that is not a crime. All are entitled for house / HRA. Let them take any one of them.

  7. Altaf Rahman says

    Actually the law itself is cumbersome.

    Why any one has to submit the rent slips? When they fix the salary, they should fix HRA as a % of the basic salary depending on the city / town / village. Pay the employee his HRA entitlement irrespective of whether he is staying in rented house or own house or relatives house.

    The companis or govt offices can save a lot of paper work and paper. On the other hand they need a army of further employees to take care of the task of checking rent slips, checking their authneticity, approvals etc. All this is unneccessary head ache.

    Same formula should be applied to other allowances. If the company or govt org is big and has its own medical facility, no need for other documents. Employees can always go there, present their identity and get treated. If the company is small, they can cover the employees with insurance and the insurance companies will look after the documentation needs.

    By asking employees to submit rent bills, they are giving employee a chance of temptation to act illegally and when he does catching him in the name of morality etc.

    We are estill living in 19th century british raj.

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