Rules get tighter for claiming HRA, LTA

I-T department has introduced a new format to claim tax rebate

To check falsity by salaried taxpayers in claiming deductions, the income tax (I-T) department has introduced a new form that all employees will need to give their employers this financial year onwards.

Along with the new declaration (From 12BB), employees will also need to furnish evidence and information related to the deductions they claim. According to the government notification, if an individual claims housing rent allowance (HRA) of over Rs 1 lakh, he or she will need to furnish name, address and permanent account number (PAN) of the house owner. Those claiming leave travel allowance/concession (LTA or LTC) will need to give ‘evidence of expenditure’.

And, if you have a housing loan and claim deduction on the interest, you will need to provide PAN of the lender, along with its name and address. Similarly, relevant proof is needed for claiming deductions under Chapters VI-A (A) and VI-A, which cover Sections 80C, 80CCC, 80CCD, 80E, 80G, 80TTA, et al. These rules take effect from June 1.

“In the 2015 Budget, the Finance Act had introduced Section 192(2D) of the Income Tax Act. According to it, the person responsible for making payment of salary (employer) was cast with an obligation to collect the necessary evidence or proof. However, the relevant rules and form were yet to be prescribed, which the government has done now,” says Kuldip Kumar, partner, PwC India. He says details such as PAN of the house owner would help the authorities to track fudged claims. The authorities can also verify whether rent received by the owner was duly disclosed in his or her I-T return.

“The details for claiming HRA and LTA were provided earlier as well but not in this specified format. In some cases, they have asked for more details. Furnishing PAN details of lender for those claiming deductions on interest of home loan, for example, is new,” says Amarpal Chadha, tax partner at EY.

The circular, however, doesn’t specify the documents needed to support the deduction claimed. According to Jiger Saiya, partner at BDO India, the existing documents that employees provide should hold good. So, you can continue to give rent receipts for HRA and boarding pass and tickets for LTA or LTC.

Other than these changes, the government has also made a few changes to help individual taxpayers. In the same notification, the Central Board of Direct Taxes, has extended the time limit for depositing tax deducted at source on transfer of immovable property from seven days to 30 days.

According to the laws, if a person purchases a property over Rs 50 lakh, he or she should deduct one per cent as withholding tax on behalf of the seller and deposit it with the I-T department before the seventh of the following month, failing which there was a penalty. Now, the person can deposit the tax by the 30th of the following month.