Using HRA To Save Income Tax? Why It Isn't A Good Idea Anymore

New Delhi: In recent years, the Income Tax Department has been closely monitoring individuals suspected of tax evasion. Now, the department has uncovered cases where individuals have falsely claimed House Rent Allowance (HRA) benefits by misusing Permanent Account Numbers (PAN).

These individuals have been taking advantage of HRA benefits without actually paying any rent. Approximately 8,000 to 10,000 such cases have come to light. (Also Read: New Tax Rules From April 1: Did You Know About Basic Exemption Limit? Check Here)

Misuse Of PAN

Many employees are using the same PAN for claiming tax deductions. The scam came to light when the department flagged a receipt for rent amounting to Rs 1 crore as fake. The individual in question denied any knowledge of such transactions when questioned. (Also Read: 5 Financial Changes Coming In April 2024: Here's All You Need To Know)

Subsequent investigations revealed discrepancies between the reported rental income and the actual income earned by the individual. It was also discovered that some salaried-class employees were misusing PAN to claim tax deductions.

Departmental Action

The Income Tax Department is actively identifying individuals involved in fraudulent tax deductions. These individuals will be held accountable and required to pay taxes along with penalties and interest.

In some cases, legal action may also be initiated against the offenders. It is important to note that such misuse of PAN is illegal. PAN holders are often unaware of such activities. However, employers should conduct thorough checks in cases of suspected misuse of PAN.

Precautionary Measures

Tax authorities advise individuals who pay rent to their parents to make payments through electronic transfers or checks, rather than cash, to validate transactions. Parents, in turn, must report such rental income in their tax returns.

(This story was first published on Zee News Hindi and curated by Kriyanshu Saraswat)