The Income Tax department has uncovered numerous cases of discrepancies between rent received and HRA claims, leading to taxpayers being notified through the ‘e-verification’ system on the department’s compliance portal.

It is important to note that as per the law, if the annual rent exceeds Rs 1 lakh in a financial year, it is mandatory to obtain and quote the landlord’s PAN. However, landlords often avoid providing their PAN. If a tenant uses another landlord’s PAN to claim HRA to avoid issues, both parties can face trouble with the tax authorities.

The tax department has observed instances where taxpayers wrongly claimed HRA exemptions by fabricating rent payment to landlords.

Liability of Landlords for Misused PAN in HRA Claims

In cases where it can be proven that the landlord had no knowledge of their PAN being misused, they should not face legal issues.

If your PAN is fraudulently used to claim House Rent Allowance (HRA) without your consent or knowledge, you should not be personally held accountable. However, prompt action is crucial, and you have the right to challenge false claims made with your PAN.

Landlords have received notices from the Department for purported rent when their PAN was misused. The use of PAN lends credibility to the HRA claim, making it more likely to be allowed without thorough scrutiny.

Denying tax liability for purported rent involves extensive effort and a lengthy process to prove non-receipt of the rent.

In higher-value rental cases where landlords share the PAN, the tax authorities often identify cases where tenants claim higher HRA than the actual rent or where the landlord accepts part of the rent via cheque and the remainder in cash for further action.

Landlords can have proceedings closed if they prove that they did not receive the rent and their PAN was misused. However, failure to prove this can lead to tax liability and lengthy litigation processes.

Consequences for Landlords Whose PAN is Misused for HRA Claims

If a landlord’s PAN is misused to claim HRA, both the individual misusing the PAN and the landlord can face trouble with the income tax department. This is because every HRA claim should have a corresponding rental income declared for income tax.

Misuse of your PAN for HRA benefits can result in the fraudulent HRA amount being treated as taxable income, leading to taxes, interest, and penalties if not addressed.

Steps for Landlords to Take