Proof of prior years HRA claims; Can you really rest secure after CBDT’s pledge of no review of old HRA cases?
If you claimed an income tax deduction or exemption while submitting your income tax return, you must preserve proof that supports it since the income tax department may request it.
As per media sources, the income tax department is conducting a special campaign to discover fraudulent HRA claims from prior years.
Although CBDT (Central Board of Direct Taxes) recently confirmed that there was no special campaign for re-opening the cases with mismatches in data related to the House Rent Allowance (HRA).
CBDT said in a Press Release, “There is no special campaign to re-open cases of mismatch, and reports of media claiming that the CBDT is conducting large-scale re-opening are absolutely incorrect. At the beginning, it is noted that any concerns about retrospective taxation on these matters and the re-opening of cases involving HRA claims are unfounded. For the financial year 2020-21, data analysis was performed on particular high-value cases of rent mismatch between employee payments and recipient receipts.”
But this does not mean that you may live worry-free if there is a discrepancy between the rent you paid and the rent received by the landlord, indicating the possibility of tax evasion.
Which taxpayers should be concerned if captured by the Income Tax Department?
Taxpayers who make false HRA claims, whether consciously or not, should be concerned about receiving a tax evasion notice from the income tax department.
For example, suppose an individual used a bogus rent agreement and receipts to claim a false HRA; in this situation, the individual intentionally attempted to evade taxes.
Tenants must be prepared for a scenario in which the landlord denies any rent payment received from the employee, rendering the employee’s HRA claim worthless and putting him in jeopardy. The income tax department may give him a notice regarding this matter in the conclusion.
Some cases have happened where the landlords initially accepted rental payments in cash from tenants and then abandoned them when a tax-related difficulty arose.
Since it is necessary to provide the landlord’s PAN details in cases where the annual rent surpasses Rs.1 lakh, the income tax department may track the landlord’s rental income as well as the HRA claim made by the employees using this data, experts believe.
When and in what circumstances will the income-tax department catch you?
There is nothing that prevents the income tax department from catching you if you are evading taxes, expert says.
However, the tax department is unable to pursue old cases due to statutory limitations.
No revisiting of old cases under section 149 is permitted after three years from the end of the assessment year unless the income that has eluded assessment exceeds Rs.50 lakh, as per the prevailing law. For FY 2019-20 (equivalent to Assessment Year 2020-21), the three-year period ended on March 31, 2024.
