I-T department’s new LTA, HRA reporting form may detect fake claims

Experts say changes announced on Tuesday in reporting format for individuals claiming tax deduction on LTA, LTC, house rent allowance and interest paid on home loans is aimed at plugging leakages on account of fake bills.

You may no longer be able to provide fake bills to claim income tax deductions for leave travel allowance (LTA) and house rent allowance (HRA). Changes announced on Tuesday in reporting format for individuals claiming tax deduction on leave travel allowance (LTA), leave travel concessions (LTC), house rent allowance and interest paid on home loans is aimed at plugging leakages on account of fake bills, experts say.

Also read :Calculation of Income Tax on Interest on GPF - DoP circular dtd 15/02/2022 & Gazette Notification

“The tax authorities are making efforts to plug leakages under tax provisions by tightening the procedure to claim tax exemptions.They are making it difficult to back claims with fake rent receipts and leave travel expenses. Initially one had to purely mention the sum claimed under exempt allowances. Now additional details have been asked for to curb the practices of claiming of fake receipts,” says Manish Shah, CEO and Co-founder, BigDecisions.com, a financial services advisory platform.

The I-T department’s has announced a new standard Form 12BB for salaried taxpayers to claim tax deduction on LTA, LTC, HRA and interest paid on home loans. With this, traxpayers will have to furnish to their employers proof of travel for claiming LTA and LTC benefits. In case of HRA, the Central Board of Direct Taxes has asked employees to furnish details including name, address and PAN number of the landlord if the aggregate rent paid exceeds Rs 1 lakh a year.

Also read :Calculation of Income Tax on Interest on GPF

For claiming deduction of interest on home loan, the name, address and PAN of the lender will have to be furnished. Evidence of investment or expenditure will have to be provided for claiming tax deduction under Chapter VI-A which relates to allowable deductions under various sections including Section 80C, Section 80CCC and Section 80CCD. Section 80C allows deductions upto Rs 1.5 lakhs on specified investments.

The rules will be applicable from June 1, 2016.

Shah said since the new forms would make it easier for both taxpayer and employer. “Since it is a standard form it will help employees and employers as well. It will have all the details pertaining to the relevant tax deductions made by an employee,” he said.

He pointed out that earlier, Form 16 contained the HRA exemption as claimed by the employee. HRA exemption would be calculated by the employer and shown in Form 16 provided rent receipt were submitted on time. For claiming tax exemptions for LTA, one must preserve the documentary proofs (journey tickets) required to make a claim for LTA. The employer has the right to demand such proofs from the employee. Deductions for interest paid on home loan was claimed under section 24(b).