The assessing officer of the Income Tax department can demand proof such as leave and licence agreement or the letter to the housing co-operative society informing about the tenancy, electricity bill, water bill, etc, in allowing a lower taxable income as computed by a salaried employee
It is bad news for those who just produce fake rent receipts to lower their tax burden. In a new ruling, the assessing officer of the Income Tax department can demand proof such as leave and licence agreement or the letter to the housing co-operative society informing about the tenancy, electricity bill, water bill, etc, in allowing a lower taxable income as computed by a salaried employee.
As per a report in The Economic Times, the Income Tax Appellate Tribunal (ITAT) ruling has now laid down the criteria for the assessing officer to consider the claim of a salaried employee and if necessary question its justification. This will put the onus on the salaried class to follow the rules in availing the tax rebate.
None of the necessary documents – the leave and licence agreement or the letter to the society – are available with those submitting fake receipts. “Even if a person is a genuine tenant, the amount mentioned in the receipt may be more than what's paid. This will not pose a problem if the person receiving the rent is outside the tax net. There are several instances where a person may be staying separately but claiming to pay rent to a relative owning another property in the same city; or, one of member of the family claiming a loan repayment deduction while another submitting a false rent receipt to evade tax,” the ET report informed.
The ITAT ruling comes a few months after the government's decision to cap the loss on property bought with borrowed money. “Till now, a person paying an interest of, say, Rs 3 lakh on a loan (he took to buy the property) and earning Rs 1.2 lakh as rent could show the difference of Rs 1.8 lakh as 'loss' and set it off against salary income to pay lower tax,” the report added.
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