Rent receipts for HRA are records that prove that the rent payment has passed from the tenant's hands to the landlord's hands. It is a necessary document for claiming the House Rent Allowance (HRA) benefit from the employer. The employee must furnish the company with legitimate rent receipts. However, several incidents have recently been documented in which the employee falsifies the rent receipt to claim the HRA benefit. It is unlawful to falsify rent receipts for tax purposes, and it can result in serious legal consequences, as we shall detail later in the essay. First, let us investigate why individuals falsify rent receipts and how they do it.

How Can Someone Impersonate a Rent Receipt?

According to the IT Act of 1961, HRA pr​ovided by the employer is not taxable, subject to a qualifying cap calculated based on the employee's basic income, HRA, and real rent paid. As a result, HRA greatly reduces employees' effective tax outgo. As a result, some people, although living in their own houses, fabricate false rent invoices to claim the HRA benefit.

They construct a rent receipt using online rent receipt generators or by filling out the rent data in hra rent receipt format, then sign it in the name of a fictitious landlord to pass it off as an authentic receipt. Employees who reside in their own houses may transfer payments to close relatives such as a brother or sister and get a rent receipt from them to receive the HRA benefit. It is critical to proving that the rental transaction occurred; just receiving the rent receipt from a relative does not constitute rental activity.

For example, if the rent payment exceeds Rs 1 lakh in a year, the landlord's PAN number must be included on the rent receipt. Many times, persons who fabricate rent invoices do not include the PAN number, or they include the incorrect PAN number, which is discovered during the verification process.

Employees may be required to present a rent recipt to claim HRA benefits even if they own a house in the same city.

The penalty for falsifying a HRA rent receipt might be harsh, and employees could face serious consequences. If you are looking for home for rent in Noida. Let us investigate the numerous penalties for falsifying a rent receipt. 

Also, Read our other blog to know more about "Lock in Period in Rent Agreement"

Punishment for Fake Rent Agreement for HRA

The severity of the penalty for forging a rent receipt varies based on the amount of rent and the kind of forgery. The following are the various fake rent receipts and their consequences:

If income is under-reported, the Income Tax Department can apply a penalty of up to 200 percent of the tax owed on the under-reported income.

Under-reporting of income might result in a 50% penalty.

In the event of a data discrepancy, the IT Department may issue a notification requesting legitimate papers, commence inspection, or revoke the HRA exemption.

Income Tax Department Verification

The IT Department can validate the rent receipt in India in a variety of methods, including:

  1. Absence of a rent agreement when claiming HRA by producing a rent receipt
  2. The landlord's PAN number is incorrect or fictitious as shown on the Income tax house rent receipt.
  3. The employer failed to declare the HRA benefit on Form 16.
  4. In the lack of acceptable supporting documentation, the employee claimed HRA against a rent receipt given by a close relative.
  5. When the employee receives the notification from the IT Department, he or she must answer within the timeframe indicated. If the IT Department requests a supporting document, it should be delivered as soon as possible to prove the allegation.

Also, Check out our other blog on "Complete guide on Renting a House

Things to remember to avoid charges linked to a forged rent receipt

Here are some key considerations to remember to avoid accusations linked to forged rent receipts:

  • Obtain a legal agreement from the landlord.
  • Try to pay your rent online or by check.
  • If the rent payment exceeds Rs 1 lakh in a year, obtain the landlord's PAN data from the rent receipt.
  • The renter should retain a record of all utility bills paid.
  • If the landlord does not have a PAN, a declaration should be submitted together with a fully completed Form 60.
  • If you get your rent receipt from a close relative, the specifics of the rent should be listed in their ITR and should match the data on your rent receipt.

“Rent receipts can surely be the best way to save on additional tax on your income, but that doesn’t mean that you start taking advantage of it. Fraudulent rent receipts might put you behind bars the way same they save tax for you. So be careful, don’t use the luxury against yourself, and be a responsible citizen.”

Need Professional Help? Contact BivocalBirds:

If you're uncertain about the legitimacy of your rent receipts or have concerns about the House Rent Allowance (HRA) process, it's advisable to seek professional guidance. BivocalBirds is a team of professional experts that will help you provide the best rental property in Noida and are well-versed in renting solutions. Contact us today!