What are the mistakes to avoid while claiming House Rent Allowance (HRA) on the ITR?

Introduction

House Rent Allowance (HRA) is an important component of an individual’s salary paid by their employers. It is provided to employees to meet their requirements for rented accommodation. Salaried individuals can claim an HRA exemption or HRA deduction to lower their tax rate either partially or entirely. While claiming HRA, it is important to avoid mistakes such as submitting fake rent receipts, claiming HRA when living in your own house, etc could lead to penalties or even legal action. In this article, we’ll discuss some common mistakes to avoid while claiming HRA on your Income Tax Return (ITR) Filing.

What is the House Rent Allowance (HRA)?

House Rent Allowance (HRA) is an allowance paid by an employer to an employee to cover their rental expenses. It is usually a percentage of the employee’s basic salary and is paid in addition to the basic salary. The purpose of HRA is to provide financial assistance to employees who live in rented accommodations and help them manage their housing expenses.

What are the mistakes to avoid while claiming HRA on ITR?

The following are the mistakes to avoid when claiming HRA on Income Tax Return:

1. Submitting fake rent receipts

One of the biggest mistakes taxpayers make when claiming HRA is submitting fake rent receipts. This is a serious offense that can lead to legal action and penalties. It’s important to keep all original rent receipts and other relevant documents like rental agreements, utility bills, and landlord’s PAN card ready to provide them as proof in case of any scrutiny by the tax authorities.

2. Claiming HRA when living in your own house

If you are living in your own house or have no rental agreement, you cannot claim HRA. Many taxpayers make the mistake of claiming HRA without having any rental agreement or living in their own house. Such claims can easily be identified by the tax authorities during scrutiny and can lead to penalties and legal action.

3. Not knowing the actual HRA exemption

The actual HRA exemption is calculated based on the salary structure, actual rent paid, and the city of residence. Many taxpayers assume that they can claim the entire HRA received as tax-free, which is not true. It’s important to know the actual HRA exemption as per the tax laws and claim accordingly.

4. Claiming HRA when not received

Another common mistake made by taxpayers is claiming HRA even if they have not received it. HRA is a component of the salary, and it is paid by the employer to the employee. If you have not received HRA, you cannot claim it. The HRA exemption can only be claimed if you have received HRA as part of your salary

5. Not submitting Form 12BB

Form 12BB is a declaration form that needs to be submitted to the employer to claim an HRA exemption. It is a mandatory document that needs to be submitted along with the rent receipts to the employer. Many taxpayers make the mistake of not submitting Form 12BB, which can lead to the denial of the HRA exemption.

6. Claiming HRA for the full year

HRA exemption can only be claimed for the period during which you have paid rent. Many taxpayers make the mistake of claiming HRA for the full year, even if they have stayed in the rented house for only a few months. It’s important to calculate the HRA exemption based on the number of months for which rent has been paid.

Conclusion

In conclusion, claiming HRA on your ITR Filing can help reduce your tax liability, but it’s important to do it correctly to avoid any mistakes that could lead to penalties or legal action. Keep all the relevant documents ready and calculate the actual HRA exemption before claiming it. Also, ensure that you have received HRA before claiming it, and submit Form 12BB along with the rent receipts to your employer. By avoiding these common mistakes, you can ensure a hassle-free tax filing experience.