Fake Rent Receipt: Planning to submit fake rent receipts in ITR filing? Know how the I-T department can identify and punish you

To show bigger HRA expenses than they are spending, taxpayers usually fabricate phoney rent invoices. This helps them make their taxable income lower and ultimately pay less income tax.

Sometimes, people don't live on rented house. As they live with family or friends in their own house, they make fake rent receipts to take te benefits of HRS exemptions.

If an employee shows a higher rental amount, they can reduce their taxable income accordingly.

The income tax department uses various techniques to identify fake documents like rent receipts.

The I-T department uses AI technologies to detect suspicious activity and they can easily catch if any fake document is submitted.

As submitting landlord's PAN details is necessary if you are claiming HRA of more than Rs 1 lakh in a year, the I-T department can match details with the PAN card with the rental amounts declared on the taxpayer’s Form 16 and other documents.

The I-T department can also verify details with landlords. 

The department can impose a penalty of up to 50 per cent of the tax in case of a taxpayer has underreported their income.

The individuals who intentionally misreport their income, also not spared by the department. They may need to pay up to 200 per cent penalty of the tax due on the misreported income.

Landlords and taxpayers who make false claims may also be charged with tax fraud, which may result in additional inquiries and judicial action.

Taxpayers might also need to pay interest on the overdue tax under these sections of the Income Tax Act.