AIS can put an finish to all bogus HRA exemption claims
In a bid to advertise voluntary compliance and deter non-compliance, the revenue tax division has now made accessible an Annual Information Statement or AIS for particular person taxpayers. The AIS is ready to give a close to full view of a taxpayer’s monetary dealings. This is a powerhouse of knowledge that may be downloaded by logging in to https://eportal.incometax.gov.in/. It contains particulars of a taxpayer’s financial savings account curiosity (together with checking account quantity), dividend revenue, transactions made in shares, combination mutual fund transactions (not SIPwise), international remittance info and a complete lot of different particulars.
One of the fascinating and vital objects included within the AIS is the rental revenue of a landlord. The AIS is now displaying rental revenue for many who have let loose their property to a different taxpayer; who in flip is claiming HRA exemption for the hire paid to the owner. Let’s perceive how this works. To enable HRA exemption, employers are required to gather PAN of the owner from the worker the place the month-to-month hire paid by an worker exceeds ₹8,000. This info is then submitted by the employer within the TDS return filed by them in Form 24Q as required below Section 192 of the Income Tax Act.
Let’s perceive this extra with the assistance of an instance. Suman from Delhi lives and works in Bengaluru. Her employer has given her an possibility to say home hire allowance (HRA). HRA is a crucial a part of the revenue of a salaried worker. Suman can declare tax exemption as per HRA guidelines if she lives on hire and pays hire.
All that Suman has to do is to make a disclosure to the employer that she desires to say HRA exemption by submitting hire receipts. She can be required to submit the hire settlement for the home that has been rented. As per the revenue tax guidelines, in case the month-to-month hire exceeds ₹8,000, the PAN of the owner have to be submitted to the employer. Suman pays ₹10,000 per thirty days to Aruna, her landlord. She asks Aruna for a duplicate of her PAN card and submits it to her employer. Her employer collects comparable info from all the workers who declare HRA exemption the place the hire exceeds ₹8,000 per thirty days. The employer then recordsdata a return of TDS deducted on wage by submitting Form 24Q the place every of those PAN numbers of landlords are reported, in instances the place HRA exemption has been allowed.
When Aruna downloads her AIS from the revenue tax division web site, she will see rental revenue talked about in it. She can now not keep away from reporting it in her revenue tax returns.
The authorities has put a number of mechanisms in place to make sure rental revenue is obtainable to tax. One of which was the introduction of Section 194I through Budget 2017. As per this variation, people (not coated below tax audit) paying hire to a resident of India, the place the hire exceeds ₹50,000 per thirty days, are required to deduct TDS at 5%.
This modification was made efficient 1 June 2017. The inclusion of rental revenue in AIS is now the ultimate straw. This additionally will doubtlessly draw a curtain on bogus HRA claims, the place taxpayers offered PAN variety of relations and even faux PAN numbers assuming it as only a reporting requirement. Whichever PAN they report, rental revenue will probably be plotted to that PAN and if such revenue isn’t included in ITR, it could change into a motive for receiving an revenue tax discover.
On the opposite hand, a real particular person could discover faux rental revenue of their AIS, after they haven’t really earned any such revenue. This could occur in a scenario the place somebody made a bogus declaration of HRA and submitted their PAN quantity erroneously as that of the owner. Such taxpayers ought to submit a ‘feedback’ on AIS on the revenue tax e-portal, the place they will declare such an quantity to be ‘incorrect’.
The foremost goal of AIS is to permit pre-filing of ITR. As this kind stabilizes and in the end of time, all particulars showing in it associated to varied incomes, TDS, tax paid could also be pre-filed within the taxpayer’s revenue tax return. It could be a great follow to assessment this kind on the weekend over some sizzling cocoa.
Archit Gupta is founder and chief government officer, Clear.
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