According to the Income Tax Act, 1961, everyone is eligible for House Rent Allowance (HRA) provided by your employers. HRA helps in the reduction of tax liability. However, many salaried people toy with the idea of submitting fake rent receipts, in order to avail this exemption, despite living in own homes.
In case you plan to do this while filing your income tax returns for the assessment year 2019-20, keep in mind that this amounts to tax evasion, which is a punishable offence.
If, in a year, you pay more than Rs 1 lakh as rent, you should submit your landlord's PAN number also along with the rent receipt at the time of filing returns.
With the help of technological advancements, the Income-tax department is now keeping a close tab and will immediately issue a legal notice demanding proofs for the claimed deduction whenever they spot something fishy.
If you fail to submit any proof, then the taxmen will disallow the claimed exemption. But if the I-T department finds your claims to be fake, it will result in penalties for misreporting or under-reporting of income.
According to Section 270A of the Income Tax-Act 1961, the taxmen can levy 50 per cent penalty, if income has been under-reported. However, if under-reporting of income is a result of misreporting of income, a 200 per cent penalty can be levied.
Hence, if you wilfully produce fake bills to misreport your income, you will have to face a 200 per cent penalty, in addition to which, you will have to pay interest under sections 234A, 234B and 234C of the Income-Tax Act 1961.
As of now, there is no law in India that prevents a person from staying in their parents/relatives house for rent, but it is mandatory to have proper documents to support your claims.