There have been reports in the past that the Income Tax Department has been monitoring the differences in house rent allowances. However, the IT department recently assured us that old HRA claims will not be re-reviewed. Many taxpayers will relax with this, but doing so is a mistake. If there are differences in rent and HRA, you may still get notices from the IT department.
It is important to note that some people knowingly make false claims for House Rent Allowance (HRA), and some unknowingly make HRA claims with fake PAN cards. It is advisable to keep in mind that the IT department is monitoring such activities and can take action against those who engage in tax evasion. The deadline for filing updated income tax returns for the financial year 2021-22 is March 31, 2025. Financial experts suggest that if you find any discrepancy in your ITR related to HRA, you should file an updated ITR immediately.
Under Section 149, the IT department is not allowed to reopen old cases three years after the end of the assessment year. However, in cases where the income is more than Rs.50 lakh, the IT department can reopen old cases.
It is important to keep all the documents related to income tax deductions with you as you may be asked by the IT department to show them. It has been reported that some fake HRA claims have been detected in previous financial years, and the Income Tax Department is conducting a special drive to investigate such cases. However, the Central Board of Direct Taxes (CBDT) recently clarified that no special drive is being conducted to reopen old cases related to HRA claims.
Even though the Board of Direct Taxes has made an announcement, it is still important to ensure that there is no discrepancy between HRA claims and the rent paid to landlords. Tax evasion notices can still be issued if any such discrepancies are found. The IT department is currently re-examining HRA claims in some special cases. It is worth noting that the announcement made by the CBDT on April 8, 2024, was a media announcement and not a legal circular. If there is a difference in HRA claims, the Income Tax authorities may send notices and take steps to recover the correct tax.
