As the close of the current financial year comes near, many employees have started to receive emails from their HR department to submit bills for any reimbursement or deduction claimed for the financial year 2018-19. You may be under constant pressure to submit bills, but make sure you only submit real bills, as submitting fake bills can end in a notice of under-reporting of income.
There are many expenses where employee can claim reimbursement from employer and therefore it does not add to his total income and thus he can save tax. The common ones are medical bills of up to Rs 15,000 and Leave Travel Allowance (LTA) bills such as train and air tickets for domestic travel.
For many years up till FY 2017-18, reimbursement of medical bills up to Rs 15,000 in one fiscal was exempted from income tax. Similar tax-exempt reimbursement of domestic travel tickets is permitted, subject to certain conditions.
No fake bills
Those who do not have bills of sufficient value to claim the full amount they are entitled to (as per their company policy) may be tempted to claim the reimbursements by submitting fake bills to their companies to get the tax-exempt reimbursement. The income tax department may get to know about the fake deduction at the time of scrutiny of your returns or it may ask your employer to furnish the supporting evidence for tax deducted at source (TDS) under Section 192 of the Income Tax Act and check the authenticity of documents submitted. You must know that the income tax department keeps a tab on all your financial transactions, as banks intimate the I-T department about all high-value transactions done.
There have been many instances where HRA claim was made and accepted by the employers based on the rent receipt. However, at the time of scrutiny it was found that there was no rent agreement or any proof of payment actually been done. The tax department will ask you to provide documents and transactional proofs such as bank account statement, etc., for the same. If you are unable to provide the same, then the department will reject your claim and ask you to pay additional tax on the income along with interest and penalty.
Penalty for fake bills
Further in case the rent amount you are paying is less than Rs 1 lakh then landlord PAN is optional. But if the rent is more than Rs 1 lakh a year, then you have to mandatorily give a signed copy of the landlord’s PAN card. Do remember that many people just provide rent receipt to employer without giving additional documents and information about landlord. Such fake claims can be part of scrutiny and if you are unable to provide agreement and payment proof then you may be liable to pay penalty.
As per Section 270A(1), a penalty of 50% will be levied if income has been under-reported. However, if under-reporting of income is a consequence of misreporting of income, then penalty of 200% can be levied. Therefore, an individual’s deliberately submission of fake bills to misreport the income may attract penalty of 200%.
So it is better to avoid short cut and and not submit fake bills. Employees are advised to keep records of all the bills and payment made through cash. If the transaction is done through net banking or credit card it becomes easy to prove.