Submit proof for your HRA exemption claim: I-T dept

Mumbai: From now on, claiming tax benefits on rent paid under House Rent Allowance rules of Income Tax Act will no longer be that easier.  This especially when you are staying at your parent's or relative's place.

Given the substantial rise in number of fake rent receipts that are being submitted with employers, the income tax department has decided to change some rule, and make them tough too.

I-T department will subject such requests for exemption to strict scrutiny under income tax rules before any such benefit is granted to the taxpayer. The department will direct employers to ask employees asking for HRA exemptions to furnish 'substantial' proof.

Majority number of employees under salaried class bracket claim income tax exemptions on HRA at the end of every financial year to pay lesser taxes as section 10 (13A) of the Income Tax provides for exemption.

An Income Tax Appellate Tribunal in Mumbai recently denied a woman a claim on house rent allowance. Times of India report said she had paid rent in cash to her mother, "but was unable to substantiate it".

Mumbai tribunal observed, "An assessee cannot be granted exemptions on house rent allowances (HRA) against 'sham' rent payments."  Most of the exemptions claimed by employees in the name of parent's home will require more proof.

Mumbai bench of tax tribunal read out a number of 'additional' documents needed by employees to support their claim of "staying at parent, relative's home".

The bench has mandated employees to produce leave and licence agreement, letter to society intimating about tenancy, payment through bank, cash payments backed with known sources etc.

Apart from that electricity bill payments through cheques, water bill payments through cheques etc besides the correspondence during the period of alleged tenancy will also be required.