Beware of Fake Rent Receipts: Tax Authorities Are Watching

With the March 31 tax deadline approaching, many people are looking for ways to save on taxes. However, some try to cheat the system by submitting fake rent receipts to lower their taxable income. While this might seem like an easy trick, the Income Tax Department is cracking down on such fraud using advanced technology.

How Fake Claims Are Detected

Since all your financial transactions are linked to your PAN card, the system can easily verify whether your rent claim is real. If there are mismatches in the rent amount or landlord’s details, the department will know immediately and may send you a notice.

No Verification for Rent Below ₹1 Lakh

If your rent is less than ₹1 lakh per year, the Income Tax Department does not verify your claim. However, any rent above this amount requires proper documentation.

AI is Catching Fake Rent Claims

The Income Tax Department is using Artificial Intelligence (AI) to detect fake rent receipts. AI cross-checks your claimed rent against financial records such as:

• Form 16 (salary details)
• Annual Information Statement (AIS) (income and expenses)
• Form 26AS (tax credits and payments)

If the numbers don’t match, the system instantly raises a red flag.

Why People Fake HRA Claims

Some taxpayers inflate their rent to pay less tax. For example, if someone falsely claims to pay ₹20,000 rent per month (₹2.4 lakh per year), they can reduce their taxable income. However, with AI-powered tracking, this type of fraud is becoming riskier.

When Do You Need Your Landlord’s PAN?

• If your annual rent exceeds ₹1 lakh, you must provide your landlord’s PAN number.
• This rule helps prevent fraudulent claims and ensures transparency in tax filings.

The Bottom Line

Submitting fake rent receipts may seem tempting, but it’s not worth the risk. The Income Tax Department’s AI tools are making it easier than ever to catch fraudsters. Always ensure your rent claims are genuine to avoid penalties or legal trouble.