Taxpayers beware! Income tax department uncovers HRA fraud using fake PAN | How to avoid I-T action

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New Delhi: The Income Tax department has uncovered alleged fraud committed by taxpayers who were not tenants claiming tax deduction for house rent allowance (HRA) by furnishing fake PANs. The I-T department discovered 8,000-10,000 such cases. The declarations amount to Rs 10 lakh or more.

How did income tax department uncover rent receipt fraud?

I-T officials pursued a case in which rent receipts worth Rs 1 crore had been furnished for HRA claims. When they confronted an individual about the rental income, they said they no knowledge about it and they had not received any rent. The I-T department then went on to probe PAN used in other filings and uncovered that it was common to furnish fake PANs for HRA claims, the TOI reported. In some cases, employees have shared the same PAN seeking tax deduction.

What will the income tax department do next?

The income tax department plans to go after these individuals who have furnished fake PANs. While the mode of pursuit is unclear. To be sure, the Income Tax Act allows tax deduction at source for monthly rent exceeding Rs 50,000 or annual rent payments exceeding Rs 6 lakh. This has prompted individuals to use this provision to avoid tax payments on rental income.

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