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Income Tax

HRA allowance to be scanned by the Income Tax Department

9 years ago 2 min read

Here is some bad news for tax evaders. A circular issued by the Central Board of Direct taxes states that salaried taxpayers claiming exemption for HRA allowance now need to quote their landlord’s PAN if the total rent in a year is more than Rs. 1 lakh. If the landlord does not have a PAN, the assessee has to submit a declaration stating the fact from the landlord. The name and address of the landlord needs to be filed by the employee.

But the procedure of Income Tax scrutiny as said by the income tax department does not aim the returns filed by small taxpayers and senior citizens. Such returns will not be brought under the scanner unless there is some specific information to do so.
Earlier provisions:

As per the earlier provisions, if the total rent paid by an assessee was less than Rs 15,000/- per month, there was no requirement to quote the PAN details of the landlord. The new circular tends to lower down this limit to Rs. 8,333/- per month.

Object of the new provisions:

This new rule is an attempt to check tax evasion by salaried persons who file manufactured rent receipts to avail HRA exemption on their tax. During its recent deliberations, the department has decided to strengthen the rules to check tax evasion by the salaried persons. This has been done to collect more revenue under the head of TDS.

But according to the new rule even honest taxpayers might have to face some problems. This new rule might create problems for many employees as landlords generally do not intend to provide PAN details or grant rent receipt to tenants.

The circular issued by the CBDT has also given a warning. As per provisions of section 10(13A) of the Income Tax Act, salaried employees availing benefits of HRA allowance up to Rs. 3,000/- a month do not need to produce rent receipts. This relaxation is only for the purpose of tax deducted at source. In the normal assessment of the employee, the Assessing Officer can call for any kind of enquiry if he deems fit and proper for satisfying himself that the employee really has any expenses towards payment of rent. This has been specified by the circular.

As per records, the direct tax collected from April to September, this year touched Rs. 3 lakh crore, which indicates a hike of more than 10 per cent over Rs. 2.72 lakh crore which was collected in the corresponding period of the previous financial year.

The government has set up a 19 % growth target for collection of direct taxes. In the first six months only 45 per cent of the target aimed for total direct tax collection of Rs 6.72 lakh crore has been achieved.