• Notification Date: 10-04-2024
• Notification No: N/A

CBDT to Reopen Cases about False HRA Claims; Income Tax Body Issues Clarification

The Central Board of Direct Taxes (CBDT) has rejected all media reports suggesting the large-scale reopening of cases related to incorrect house rent allowance (HRA) claims. On Monday, April 8, the CBDT clarified that “apprehensions about retrospective taxation on these matters and re-opening of cases are completely baseless." 

In its notification, the apex decision-making body in matters of income and corporate taxes said that it has already taken actions in certain instances of information mismatch as filed by the taxpayers and as available with the IT department under its routine data verification exercise. Under the routine exercise, the “IT department has alerted the taxpayers to enable them to take corrective action," the CBDT said in its notice. 

“Some posts on social media, as well as articles in the media, have highlighted enquiries initiated by the CBDT in cases where employees have made incorrect claims of HRA and rent paid. At the outset, it is stated that any apprehensions about retrospective taxation on these matters and re-opening of cases on issues about HRA claims is completely baseless," the income tax body said.   

The data analysis was conducted only in some high-value cases of mismatch between the “rent paid by the employee and receipt of rent by the recipient for the FY 2020-21". 

“It is reiterated that there is no special drive to re-open such cases, and media reports alleging that the Department is undertaking large-scale re-opening are completely misplaced," read the notice released by the Income Tax Department on April 8. 

The department further highlighted that the verification drive was carried out in a small number of cases without any reopening of cases in bulk amounts. The notice also mentioned the main motive of the e-verification of HRA claims, which was to alert cases of mismatch of information for FY21 without affecting others. 

What is HRA? 

House rent allowance is a part of salary income and comes under taxable income. Income taxpayers can claim tax exemption for the HRA they have been receiving if they are living in rented accommodation by submitting original rent receipts as proof. HRA tax exemption is provided under Section 10(13A) of the Income Tax Act. However, it is not applicable to taxpayers who have opted for the new tax regime.