CBDT refutes media reports, affirms no special initiative to reopen cases on HRA claims mismatch

New Delhi: On Monday, the Income Tax Department reported a discrepancy between the rent paid by salaried individuals and the rent received by landlords for the fiscal year 2020-21. The department conducted a data analysis for cases with high values.

Contrary to reports suggesting a specific initiative by the department to revisit House Rent Allowance (HRA) cases, the Central Board of Direct Taxes (CBDT) clarified that only a “limited number” of cases underwent verification of the rent paid by tenants and the rent received by landlords.

CBDT clarified that apprehensions about retrospective taxation on re-opening of cases on issues pertaining to HRA claims are completely baseless. CBDT also reiterated that there is no special drive to re-open such cases, and media reports alleging large-scale re-opening by the Department are misplaced.

The CBDT stated: “For the fiscal year 2020-21, data analysis was performed on a few high-value cases where there was a mismatch between the rent paid by the employee and the rent received by the landlord. This verification was conducted in a limited number of cases, without reopening a large number of cases, particularly since taxpayers could have filed an Updated Return for FY 2020-21 (AY 2021-22) only until March 31, 2024.”

The aim of the e-verification process was to flag cases with information mismatches for FY21, without impacting other cases.

The CBDT noted that as part of its regular data verification exercise, it has identified certain instances where the information provided by the taxpayer does not match the information available with the Income Tax Department. In these cases, the department has alerted the taxpayers to allow them to rectify the situation.

House Rent Allowance (HRA) is a component of the salary income, or Cost To Company (CTC), and is included in taxable income. However, if an employee resides in a rented property, they can claim an income tax exemption for the HRA received during the year by providing valid rent receipts.

This tax exemption is not applicable for taxpayers who choose the new tax regime, which does not offer exemptions.