Fake Rent Receipts: Landlords and taxpayers who make false claims may also be charged with tax fraud, which may result in additional inquiries and judicial action.
House Rent Allowance (HRA) is a popular tax-saving option for salaried employees, and to take this benefit, employees must submit rent receipts. However, some individuals submit fake rent receipts to reduce tax liability. But do you know that the Income Tax (I-T) Department can catch them easily by using AI and other technology? They can face a huge penalty – a fine of up to 200 per cent of the misreported amount under Section 10(13A) of the Income Tax Act.
How the I-T department can catch you
There are multiple ways that the I-T department can recognise your fake rent receipts easily.
Verify with landlords
The I-T department can verify with landlords. In this process, they match information on AIS, Form-26AS, and Form-16.
Bank statement
The I-T department can cross-check rent receipt details with bank statements.
Artificial intelligence (AI) and other technologies
AI can easily detect fake rent receipts. The I-T department can also use other technologies to detect fake receipts.
Fake PAN details
Verify that the landlord’s PAN information on the rent receipt corresponds to the information that is on file with the Income Tax Department. Fake PAN information is a clear sign of a fraudulent rent receipt.
Aadhaar details
Red flags are raised if the declared rental address is different from the one associated with Aadhaar or other official documents.
Why do individuals make fake rent receipts?
Sometimes, people don’t live on rented house. As they live with family or friends in their own house, they make fake rent receipts to take te benefits of HRS exemptions.
Tax fraud
Landlords and taxpayers who make false claims may also be charged with tax fraud, which may result in additional inquiries and judicial action.
Underreported income
The department can impose a penalty of up to 50 per cent of the tax in case a taxpayer has underreported their income.
Misreported income
The individuals who intentionally misreport their income, also not spared by the department. They may need to pay up to 200 per cent penalty of the tax due on the misreported income.
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