It's the beginning of the New Financial Year. Time to start your tax planning. Any job well begun is half done. Tax planning is no exception. So why don't you start your tax planning..... Today? It's time to talk about that tax exemption called house rent allowance, popularly called HRA. You and other employees are allowed to get tax exemption on house rent allowance under Section 10(13A) of the Income Tax Act.
HRA is an amount paid to you by your employer as a part of your salary. You get this amount, towards the expenses of your rented accommodation. Your employer decides how much HRA to give you depending on your salary and which city you live. You get HRA only if you are a salaried employee.
Now there is a problem. To claim the HRA benefit, you must actually pay rent, on the house you occupy. What if you are staying in your own apartment? How will you avail the HRA tax exemption? There is a simple solution. Just submit fake rent receipts and avail HRA benefits. But, fake rent receipts can no longer save your income tax? Why is this so....Let's find out?
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The HRA (House Rent Allowance) given to you by your employer is subject to:
The actual rent you pay – 10 % * (Basic salary)
50% of (Basic Salary) in case you reside in a Metro
40% of (Basic Salary) if you reside in any other city
Actual HRA you receive from your employer.
You have to pay tax on the amount received from your employer, minus the amount which is the least among the above three conditions.
You may also like: HRA Calculation For FY 2016 To 2017
Is it right for you to submit fake rental receipts at your office and avoid tax?
This is a practice followed by employees working in IT Firms and a number of other Companies in India. If you are a salaried employee staying in a house in which you are the owner, you cannot get the HRA benefit. So.....you submit fake rent receipts to your HR and claim the HRA benefit.
What are these fake rent receipts? If you are staying in your own house, you make a fake rent receipt and ask your parents/relatives/friends to sign on them and show them as the landlord. Even if you are staying in a rented apartment, you can show receipts for a higher amount than the rent which is actually paid. This is a wrong practice and thoroughly condemnable. If you are caught there is a high penalty + interest. You could also be prosecuted.
Your justification.....If you are staying in a rented apartment and the landlord does not give rent receipts and PAN details how else can you get the HRA benefit? If you are salaried and staying in your own apartment you say....I'm eligible for the HRA benefit. Why should I simply lose this benefit? I will submit fake rent receipts and claim the HRA benefit. Is this RIGHT?
If you are faking rent receipts to save income tax....Think Again. The Income Tax Appellate Tribunal has made a new rule. The current rules say....You only need to submit rent receipts and if the rent you pay is above INR 1 Lakh a year, you need to give the PAN of the owner of the residence.
Now....The tax assessing officer can ask for more documents and you have to prove that you are indeed living in the place for which the receipts have been submitted. If the tax officer suspects the rent receipts are fake....He will ask for the leave and license agreement. He will also ask for the letter to the housing society showing the residence has been rented out. He can ask you for the electricity bill, water bill and so on.
You could lose your job because of fake rent receipts....Worse....Jail
The tax officer will check if the address on the income tax return form you have filed, is the same as the address mentioned in the rent receipts. If you are the owner of a property (self-occupied property), you are supposed to mention this while filing ITR.
Lying on income tax returns is a fraud and you can be arrested for it. You would definitely lose your job. Is it wise to fake rent receipts just to save a few thousand rupees?
Don't fake rent receipts. Try the honest way. There are ethical ways of claiming the HRA benefit. If you are staying in the house owned by your father, pay him rent. Make a registered agreement and transfer monthly rent to your father's bank account. You can easily claim the HRA benefit. Then....Your father can always give you back the money.
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