House rent paid under House Rent Allowance is used by almost all salaried employees to save tax. The Income Tax department no longer will consider fake rent receipts as a valid form of the tax concession. Employees will be required to provide additional evidence and documents to support their claim under House Rent Allowance.
From now on, claiming tax benefits on rent paid under House Rent Allowance rules of Income Tax Act will no longer be that easier. If you are staying at your parent's or relative's place, claiming tax benefits under HRA rules of income tax act will not be easier.
HRA Tax Concession
As per the ITAT ruling, the concerned tax official who is monitoring the tax concession filed by a salaried employee can ask for further proof, in case he or she feels that rent receipts are fake.
Some of the additional documents which can be asked by the concerned tax officer are:
- Licence and Leave agreement
- Housing co-operative society letter, about the tenant and the owner
- Electricity bill
- Water bill
- Stamp paper agreement between the tenant and the landlord
Deduction of TDS
In Union Budget 2017, the Finance Minister had proposed that those who are claiming a House Rent Allowance (HRA) of more than Rs 50,000 per month will have to deduct tax at source at the rate of five per cent. The TDS will have to be deducted on the last month of the year in which rent is paid or last month of tenancy.
Tax exemption under HRA
The tax exemption under HRA was sought under Section 10(13A) of the Income Tax Act, according to which employees can avail tax exemption on actual HRA received or 50% of the basic salary for an employee working in metro cities and 40% of basic salary for an employee working in the non-metro city.