FAKE RENT RECEIPT

employer can ask for annual certificate for gross salary paid by employee , signed by landlord stating PAN number of landlord for annual report. 

Originally posted by : U S Sharma
	employer can ask for annual certificate for gross salary paid by employee , signed by landlord stating PAN number of landlord for annual report.

 Sir, When demanded for Rental agreements or the PAN, the employees put forth thier contention(Just to continue with fake receipts), that there are no such proofs explicitly mentioned in the Income Tax act, for compliance, while the same is questioned by the management too. Is thier any finer niche in the Income tax act, which says that the employer not only collect the receipt but also verify and examine the receipt.

⁸⁵[Furnishing of particulars of income under the head “Salaries”⁸⁶.

26A.   (1) The assessee may furnish to the person responsible for making the payment referred to in sub-section (1) of section 192, the details of the income under the head “Salaries” due or received by him from the other employer or employers referred to in sub-section (2) of that section and of any tax deducted at source from such income in Form No. 12B.

(2) The person responsible for paying any income chargeable under the head “Salaries” shall furnish to the person to whom such payment is made, a statement giving correct and complete particulars of perquisites or profits in lieu of salary and the value thereof in,—

            (a)   relevant columns provided in Form No. 16, if the amount of salary paid or payable to the employee is not more than one lakh and fifty thousand rupees; or

       ⁸⁷[(b)   Form No. 12BA, if the amount of salary paid or payable to the employee is more than one lakh and fifty thousand rupees, which shall accompany the return of income of the employee.]

Explanation : “Salary” for the purposes of this rule shall have the same meaning as given in rule 3.]

source:https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2005ITAct/rules026a.htm

as per income tax act there is no provision regarding varification of genuineness of rent receipt produced by the the employee. As per Sec 10(13A) and rule 2A of income tax act rent receipt produced by the employee for claiming deduction of HRA is  satisfactory avidence for the employer and duty of employer over after that.

https://ibnlive.in.com/news/forging-rent-receipt-could-cost-your-job-hc/125115-3.html?from=tn

(ii) House Rent Allowance: House rent allowance granted to the employee is exempt u/s 10(13A) to the following extent.

Provided expenditure on rent is actually incurred, the amount of exemption granted is the least of:

It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the house rent allowance or any portion thereof from the total income of the employee. Though incurring actual expenditure on payment of rent is a prerequisite for claiming deduction under section 10(13A), it has been decided as an administrative measure that salaried employees drawing house rent allowance upto Rs 3000 per month will be exempted from production of rent receipt, it may, however, be noted that this concession is only for the purpose of tax deduction at source, and, in the regular assessment of the employee, the assessing officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent

There is no provision under the act seeking the eployer to verify the correctness of the declarations given by the employee. Hoever the TDS circular issued every year one cans cast the responsibility on the employer through the following phrase. 'The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the house rent allowance or any portion thereof from the total income of the employee". Since the dept. seeks the employer to satisfy himself about the authenticity of the proof of receipts given by the employee, the employer can have a policy in place seeking the employees to give a copy of the rental agreements when the rent exceeds certain level say Rs.10,000/= etc. and also get a declaration from the employees stating that they undertake to prove the correctness of the proof given by them whenever the same is sought. This comes as a protection of the interest of the employer.

 I will tell one situation.

Dear Investor,

I donot think that, there is a security loophole in the office and employee should takeaway what they want from the office. Saving is an art i agree but faking rent agreement and rent receipt should not be given due credit of art. It has impact on the social behaviour as well as corporate behaviour of employee when encouraged such activities. I will provide you the real incident. One of the software employee(cannot classify to educated but only literate) approached finance department and verbally said he has paid 5% commission towards cooking medical bills and towards doctors prescripttion. One of a women employee takes blue pen to sign landlord signature and black pen to write the details in Rental receipt; one of employee stays in 4500/- single room and wants to claim 23000/- as rent because he gets max exemption. Is this tax saving or tax evasion. Do you think india will grow economicaly allowing him to save money through these "chor" activities. The finance dept thankfully disallowed on grounds which i will not disclose it here. Unless there is integral humanism economy will not prosper.  This faking activity has plagued among the young generation today and same generation we see supporting Anna Hazare campaign. What a destiny!

Dear Vinay,

                      Agree with whatever you said and your good intentions.. But nothing can supercede law. If you are worried for Fake receipt of an employees who are living in this Inflation Prone Country where saving is minimum and that makes them save from whatever source they can..Do you have any idea how big multinationals evade tax of Millions of Rupees p.m.??? and you are worried for 6 to 7 Lac p.m. of tax evasion by middle class person struggling for livelihood??? Your intentions are great but i am sorry on wrong way..if you want to fill up Tax Pockets of government you shall better look upon to your higher managers and directors perks and reimbursements then you will realise that there is lacs of rupees of tax evasion by a single person in the name of business promotion and all..Our views may be different but again law supercedes both of views.. So as per Taxation Laws it is enough proof if employee provides Rent Receipt. Its upto Income Tax officer to verify its genuineness. You have good intentions but please see to it if you want to stop evasion of tax first start with Top Management rather than Middle or Lower Management..My views may be wrong for you but i have experienced tax evasions of many big companies and i have read many articles which support my views..Keep the good work going but from upper level.

Dear Vinay,

                 I just read your previous comment to Mr. Investor, i didnt read it earlier, if you caught some one providing fake rent receipt and un necessarily increasing Rent Rate then on a moral ground its totally justifiable that you shall stop such non-sense.. No justification is good for such an act. May him/her be poor person that dsn't at all mean that you can do anything you want. If i was in your shoes i would have also done the similar. But again as stated earlier this Devil of Corruption wont die if you stop lower or middle level employee like this way, instead their morale will decrease as everyone know how upper level live lavishly aand spend co's money and they are not answerable to any one. So this will destroy your good intentions. But as per taxation laws if you havnt caught anyone providing fake rent receipt you dont have authority to judge its genuineness.

dear kaushik,

i am not supporting to tax evasion.  i am asking why govt kept such law to produce documentary evidence,  more than 90% employess are prone to put fake bills.  they think if i alone can do, its a very small difference to IT.  imagine, if all think like that what happens.  There is no point in putting such rule to produce receipts.

see,  because of this receipts, many fellows pay commision to medical shops and travels.

Dear Kaushik,

Many tax payers in India knows that the corrupt politicians; top business and top earning class contribute greater proportion to tax evasion than the less financial Middle class and the lower class. My understanding is that we cannot compare idealism with tax evaders class and follow their foot steps to earn livelihood. It also means you should not allow it to be encouraged, nurtured and developed. I bring it your notice of circular 5 Dated 5^th Aug 2011 “The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the House Rent Allowance or any portion thereof from the total income of the employee”. So you claim on mere production of Rental receipts cannot be held true after this circular.

My concern is that a company with 100 employee size earning 60000/- PM, Avg Salary (Of course an IT company) involved in faking rental receipts can cause bigger Tax loss. I have recalculated the numbers with the estimated genuine Rent paid numbers and it is shocking to know that TDS on salary collected is short between 7-9 Lakhs per annum .  This is just to deal with one single small size company. Multiply this considering the total working class in companies across India. I strongly opine that it would surely be Rs.500 Cr+ (conservative number). The Tax revenue on salary accounts for 30% of Direct tax revenue which means  Approx  40,000 Cr is generated  from TDS on Salary. HRA being one of bigger yielding tax exemption component would sure be important proportion in 40,000 Cr. It is to the wiser Income tax authority to assess the real loss.

I don’t  like the middle class or the lower class be blamed along with corrupt politicians and tax evaders tomorrow. It is also not ones idealism to chant corrupt mantra to earn livelihood. Today Robin hood is not worshipped, although he stole from richer and distributed for poor because his intentions were good and his approach was not right and true. A faking approach(whatever proportion) can only nurture and insulate developing more corruption to your mind which is compared to worst. Should act more educated than mere literates.