Prove Probity of Your Claims! Taxman - The New Axeman

Submitting faulty claims could up your tax outgo, while a fake claim attracts up to a 300% penalty

- Pranav Sakhadeo

Most of you might be relieved at having made your final income tax declarations for 2016-17 so as to avoid any last-minute deductions by HR. But think again. Did you submit all the documents to claim the deduction? Take guard, for the taxman is watching.

What could happen, you ask? If you are not able to prove your claim to a deduction owing to inability to submit valid documents, the claim will be rejected by the Income Tax Department and a penalty and (interest if applicable) will be imposed. The taxman could ask you to cough up a penalty of 100-300% on the tax payable, while the rejected deduction amount will also be added to your income and you will be liable to pay tax thereon.

The message: Make sure you are eligible to claim a deduction on expenses/ investments and double-check the proofs that you submit.

Don’t fake that bill

Let us examine the paper-trail that you have to maintain to claim some popular and some unknown income-tax deductions:

House Rent Allowance (HRA)

House Rent Allowance is a common component of everyone’s salary. Even though it is included in salary, it is not completely taxable. HRA gets exemption under section 10(13A) of the Income Tax Act, 1961, according to the below parameters:

Quantum of exemption (least of the following):

i) Actual HRA.

ii) 50% of salary if living in metros. 40% of salary for non-metros.

iii) Excess of rent paid annually over 10% of annual salary. Proofs required:

i) Rent receipts.

ii) If annual rent claimed exceeds Rs 1 lakh (PAN of the landlord and the rental agreement must be produced).