The Income Tax Department has discovered numerous cases of individuals using fraudulent Permanent Account Number (PAN) cards to illegally claim House Rent Allowance (HRA), even though they are not actually tenants.

The report suggested that the tax department started digging deeper into the matter after coming across rent receipts worth approximately Rs 1 crore under a single individual’s PAN.

Upon questioning the individual, the department found out that the person did not know about the transactions. Moreover, the individual did not even receive the rent attributed to the PAN.

While the tax department has come across such fraudulent use of PANs in the past, the report highlighted that the extent of abuse has become “alarming”.

Tax officials quoted in the report said they are actively pursuing employees who have filed fraudulent claims, aimed at lowering tax burden. But it hasn’t been specified whether legal action will be taken against offenders.

This shows how PAN cards can be misused. Making things more complicated is the current rule for TDS (tax deducted at source), which only kicks in for monthly rents over Rs 50,000 or annual payments above Rs 6 lakh.

Tax experts advise individuals (salaried taxpayers) to steer clear of such schemes, as the authorities can easily track down such misuse with automated processes, data analytics, and the latest technology.

What is HRA?

HRA eligibility

How is it calculated?

Actual HRA received from the employer.

Rent payment proof

Source: India Today