[ecis2016.org] It is illegal to fake the rent receipt and it can invite severe legal actions as a punishment
Rent receipts are documents that establish that the rent payment has moved from the hand of the tenant to the hand of the landlord. It is a crucial document that is required, to claim the House Rent Allowance (HRA) benefit from the employer. The employee must provide valid rent receipts to the employer. However, many cases are reported in the recent past, where the employee fakes the rent receipt for claiming the HRA benefit. It is illegal to fake the rent receipt and it can invite severe legal actions as a punishment, which we will discuss in the later part of the article. First, let us find out why people fake a rent receipt and how they do it.
You are reading: Fake rent receipt punishment: Know the consequences of providing fake rent receipts
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How do people fake a rent receipt?
According to the IT Act 1961, HRA offered by the employer is not taxable, subject to eligible ceiling worked out based on Basic salary, HRA, and the actual rent paid by the employee. So, HRA helps in significantly bringing down the effective tax outgo of the employees. Therefore, some people, in spite of living in their own homes, make fake rent receipts for claiming the HRA benefit.
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Now, the question is how do they fake the rent receipt? They generate a rent receipt using the online rent receipt generators or by filling the rent details in a rent receipt format and they sign it in the name of a bogus landlord, to perpetrate it as an original receipt. In some cases, employees who live in their own homes, transfer the payments to their close relatives like brother or sister and get the rent receipt from them, to claim the HRA benefit. It is important to establish that the rental transaction took place and merely getting the rent receipt from the relative does not constitute a rental activity. For example, it is mandatory to mention the PAN number of the landlord in the rent receipt, if the rent payment is more than Rs 1 lakh in a year. In many cases, people who fake rent receipts do not mention the PAN detail or they mention a wrong PAN detail which gets revealed during the verification.
Read also : Revenue stamp on rent receipt: When is it needed?
In some cases, employees submit the rent receipt to claim HRA calculation & HRA exemption even if they own a home in the same city.
Punishment for a fake rent receipt could be very severe and it could land employees into serious trouble. Let us find out various punishments for faking a rent receipt.
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Fake rent receipt punishment
The level of punishment for creating a fake rent receipt can vary, depending on the amount of rent and the type of forgery. Here are different types of punishments, for creating fake rent receipts:
- If the income is under-reported, the Income Tax Department can levy a penalty of up to 200% of the tax applicable on the income misreported.
- On under-reporting of income, a 50% penalty can be levied.
- On data mismatch, the IT Department may send a notice seeking valid documents, initiate scrutiny, or cancel the HRA exemption.
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Verification by the Income Tax Department
Here are various ways through which the IT Department may verify the rent receipt:
- Absence of rent agreement while HRA is claimed by providing the rent receipt.
- Wrong or fake PAN details of the landlord mentioned in the rent receipt.
- Non-declaration of HRA benefit in Form 16 by the employer.
- Employee has claimed HRA against rent receipt issued by a close relative in the absence of valid supporting documents.
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On receiving the notice from the IT Department, the employee must respond within the specified period. If the IT Department has asked for a supporting document, it should be provided without any delay, to substantiate the claim.
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Here are some important points to keep in mind to avoid charges related to fake rent receipts:
- Get a valid agreement from the landlord.
- Try to make rent payments online or through cheque.
- Get the PAN details of the landlord mentioned on the rent receipt, if the rent payment is more than Rs 1 lakh in a year.
- The tenant should keep the record of utility bills paid by them.
- If the landlord is not holding a PAN, a declaration for the same should be taken along with duly filled Form 60.
- If the rent receipt is taken from a close relative, the details of the rent should be mentioned by them in their ITR and the details should match with your rent receipt.
Read more about house rent agreement format and important clauses
FAQs
Can I claim HRA if I live in my parents’ home and pay the rent to them?
Yes, there is no restriction on claiming the HRA if you live in your parents’ or relative’s home and pay the rent to them. However, it is important to get the rent receipt from them in the prescribed format. Rent receipt, rent agreement, society’s letter of occupancy as a tenant, payment proof, etc., are some important documentary evidences that often play an important role for a valid rental transaction.
What is a valid rent receipt?
A valid rent receipt contains details such as the name of the tenant, rent amount, address of the property, period of rent, signature of the landlord, PAN detail of the landlord (If required), mode of payment, revenue stamp if the rent is paid through cash amounting more than Rs 5,000.
Source: https://ecis2016.org/.
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Source: https://ecis2016.org
Category: Property Trends
