HRA claims: No special drive to re-open cases of mismatch, says Income Tax dept

The Income Tax department on Monday said that no special drive has been launched to re-open cases of mismatch in house rent allowance (HRA) claims.

The tax authority's clarification is in relation to some media reports alleging that large-scale reopening of cases of mismatch in HRA claims are being undertaken by the Central Board of Direct Taxes (CBDT).

The IT department said that certain instances of a mismatch, as filed by taxpayers, have come to the CBDT's notice as part of its routine data verification exercise. In such cases, taxpayers were alerted to take corrective action.

However, some media reports and social media posts have highlighted enquiries initiated by the department in cases where employees have made incorrect HRA claims and rent paid, the Ministry of Finance said in a release.

"At the outset, it is stated that any apprehensions about retrospective taxation on these matters and re-opening of cases on issues pertaining to HRA claims is completely baseless," it added.

The CBDT had carried out data analysis in some high-value cases of mismatch between the rent paid by the employee and received by the recipient for the FY 2020-21.

This verification was done in a few cases without reopening most cases since the updated income tax return (ITR-U) for FY 2020-21 (AY 2021-22) could have been filed by the taxpayers till March 31, 2024.

"It is underlined that the objective of the e-verification was to alert cases of mismatches of information for FY 2020-21 only without affecting the others," the government said.

What is HRA?

The HRA is part of an employee's salary that qualifies him/her for a deduction in taxable income. The allowance is limited to 50% for employees living in metro cities and 40% of the basic pay for non-metro cities. However, to claim this deduction, the employee has to provide rent receipts as proof of paying rent.