Fake HRA claims with PAN cards
Misuse of PAN Cards for Fake House Rent Allowance (HRA)
- By Anubhuti --
- Monday, 01 Apr, 2024
The Income Tax Department has uncovered a significant number of cases where individuals used fake Permanent Account Number (PAN) cards to falsely claim House Rent Allowance (HRA), totaling around 8,000 to 10,000 cases. The amounts fraudulently claimed often exceeded Rs 10 lakh.
Discovering the fraud
This investigation began when the tax department noticed unusually high rent receipts under a single PAN, amounting to approximately Rs 1 crore. Shockingly, upon questioning, the individual was unaware of these transactions and never received the rent supposedly linked to their PAN.
Instances have emerged where employees from specific companies exploited identical PANs to claim tax benefits. Tax officials are now actively pursuing those involved in such fraudulent claims to reduce their tax burden.
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HRA Tax benefits
This misuse of PAN cards highlights a concerning trend. Adding complexity is the current Tax Deducted at Source (TDS) rule, which only applies for monthly rents over Rs 50,000 or annual payments exceeding Rs 6 lakh. Many salaried employees have exploited this loophole to evade taxes on rental income.
House Rent Allowance (HRA) is a portion of a salaried employee's income provided by their employer, offering specific tax advantages. To be eligible for HRA benefits, one must reside in rented accommodation and pay rent.
Calculation of HRA exemption
The tax-exempt HRA amount is calculated based on the lowest of the following:
1. Actual HRA received from the employer.
2. Annual rent paid minus 10% of salary.
3. 50% of basic salary (for metro cities) or 40% of basic salary (for non-metro cities).
To qualify for HRA tax exemption, employees must provide proof of rent payment such as rent receipts or a formal rental agreement with details like rent amount and tenancy duration.
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