HRA cheating is common and tax man will come for you

Are you paying rent in cash?

My friend Rajiv did the same last financial year. (And was shocked)

He paid Rs.20,000 as rent every month. Half in cash, half via online transfer.

Tax season came and he claimed the full Rs.2.4L (20,000 p.m) as HRA exemption.

Fast forward to a few weeks- His HRA exemption was disallowed.

Take a guess why this would have happened.

He filed on time
He disclosed his true rent

Yet disallowed?

Well, what happened was, his landlord didn't report the cash rent payment. Only 1.2L (10,000 p.m)

This caused a mismatch between what Rajiv claimed as rent (2.4L) and what was actually reported (1.2L)

He didnt know that - if the rent you claim is higher than what your landlord shows, the tax department may disallow a portion of your HRA exemption. And that means paying more tax than expected.

The same happened with Rajiv.

He told me about this incident. So I told him, going forward if you are claiming HRA, ensure:

>Pay 100% rent via NEFT, UPI

>Get receipts with payment mode & date

>Inform landlord of rent amount in your ITR
I've seen many salaried people lose HRA exemptions this way. Don't let it happen to you.

Tax filing season is here. Be diligent.

Your savings are key to your dreams. Protect them. more  

View all 9 comments Below 9 comments
The HRA claim under tax law is convoluted and archaic as it is linked to the Basic pay which is usually a very small portion of total compensation. It assumes a 50% rebate on basic pay for metros and 40% for other places. It covers only rentals. It is a fact that the cost of maintaining another establishment is beyond just the rentals that one pays. The issue with HRA is more to do with incorrect or false claims or wrong claims. The method and manner of exercising control over these transactions is very straight and apparent. A few people have abused the system to save on tax obligations. The issue is neither payment in cash, nor the people who game the system. For a straight-forward tax payer ensuring the following steps are good enough: (a) There is a proper agreement, (b) Landlords credentials are correct and verified, (c) The rent actually paid is properly reported, (d) In cases where TDS is required to be deducted on rentals, the same is followed, (e) All the leave and license agrements or rental agreements are registered (not simply notarised like its done in most parts of the country) so that they are accessible to the tax office for verification, (f) Make sure that everything is kept above board and clandestine arrangements are avoided. more  
Taxing Start at 3.00 L PA i.e. Rs 25000 pm. There are many people earning more then 25000 pm and are not paying any Tax. This is more so in private/self earning people. This Anamoly must stop. Further Agriculture Income must be brought under Tax net. Or Govt must increase the limit. more  
May be a limit for agriculture income and beyond limit may be taxed more  
There are lots of issues. Rent agreement and PAN No of landlord is a must for drawing HRA. The rent agreement and receipt should be presented to employer, based on which he sanctions HRA. When the landlord files his IT return, the rented property details and rental income are checked automatically and the income from property is added to the total income. There must be something wrong here. Some under reporting has taken place because of lack of transparent procedure. more  
Everybody is mentioning in favour of the Income tax department. Is anyone aware about the % of tax payers or the % of tax return filers in the country. ,it's around 5% only. Hardly 5-7 cr people are filing returns. Our working population is around 75 cr and 20 cr senior citizens. Has the IT Dept tried to ascertain, why others are not filing returns? Can anybody accept that the income levels of the rest are lower than the minimum threshold limit? Or is it tax evasion? It means others are exempted from tax complications. I personally do not have any good impression about the IT Dept. They are just stabbing the service class people, who are forced to file returns or pay tax. What about others? There should be equality for all citizens. Isn't it? We want to be developed by 2047, but have numerous issues to solve. Not possible without equality. However, the centre is not worried as they are getting revenue from the companies, who have to pay tax on their gross profit. Let individual tax be replaced with expenditure tax, wherein all adults will be contributing. more  
Even small road side vendors accept digital payment. One should shift from the cash mayment mode to the extent possible. Very soon even domestic help would start accepting the digital or direct to their Bank Account payment. more  
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