ITR Filing FY 2024-25: Your HRA Tax Exemption Claim Might Be Rejected Under These Circumstances

News18

11-07-2025

If your salary includes an HRA component, you can claim tax exemption under Section 10(13A), but many taxpayers make mistakes that attract tax scrutiny. All you need to know:
House Rent Allowance (HRA) is one of the most common tax-saving benefits available to salaried individuals in India. If your salary includes an HRA component, you can claim tax exemption under Section 10(13A) of the Income Tax Act. But, while the rules may seem straightforward, many taxpayers make mistakes that can lead to their HRA claims being rejected by the tax department.
Here's what HRA exemption is, and under what circumstances your claim might be questioned or denied.
What Is HRA And Who Can Claim It?
HRA is a part of your salary provided by your employer to help you meet your house rent expenses. Only salaried individuals with an HRA component in their salary can claim tax exemption under Section 10(13A). If you're self-employed or don't get HRA, you may still claim rent-related tax benefits under Section 80GG, but that follows different rules.
To claim HRA exemption, you need to meet these basic conditions:
Common Reasons Why Your HRA Claim Might Be Rejected
Even if you submit your documents, your claim can still be questioned or rejected under certain circumstances:
1. Fake or Inflated Rent Receipts
Some employees submit false rent receipts for houses they don't actually live in or for amounts they didn't actually pay. The income tax department has systems in place to detect such discrepancies. If you're caught, not only will your exemption be denied, but you may also face penalties or scrutiny.
2. Rent Paid to Family Members Without Clear Evidence
Paying rent to parents or a spouse is legally allowed, but it raises red flags if not handled transparently. For instance, if a husband pays rent to his wife who has no other source of income, the tax officer may question the authenticity of the transaction. The rent should ideally be transferred via bank, and your spouse should show it as rental income in her ITR.
3. No Rental Agreement or Missing Rent Receipts
Even if you're genuinely paying rent, failing to provide proper documentation can lead to your claim being rejected. You should have:
4. Rent Paid in Cash Without Bank Proof
If you're paying rent in cash and can't show a clear bank trail, your claim can be doubted. It's better to pay rent via bank transfers, UPI, or cheques for transparency.
5. Landlord's PAN Not Provided for Rent Over Rs 1 Lakh
If your annual rent exceeds Rs 1 lakh, you must provide your landlord's PAN to your employer or the tax department. If you fail to do so, your claim may be rejected.
6. Mismatch in Address or Details in ITR Vs Employer Records
If the address mentioned in your HRA claim doesn't match the address where you're supposedly living, or if the details in your ITR don't match employer records, your claim may be flagged for scrutiny.
Can the Tax Department Question Your HRA Claim Even with Proof?
Yes, they can. Even after submitting rent receipts, agreements, and PAN details, your claim can be rejected if there are discrepancies or inconsistencies. Just submitting documents is not enough; they must be genuine and verifiable. During scrutiny, the Assessing Officer can demand further explanation or evidence.
According to an Economic Times report, chartered accountant Suresh Surana said: 'Even with proper documentation, disputes may arise if the tax authorities find discrepancies or non-compliance with legal provisions. Even after submitting all necessary proofs and declarations related to House Rent Allowance (HRA) in the Income Tax Return (ITR), the Assessing Officer (AO) may still dispute or reject the claim under certain circumstances. Merely furnishing documentation does not automatically validate the exemption if discrepancies, inconsistencies, or red flags are identified during assessment or scrutiny proceedings."
In order to claim HRA tax exemption, employees must provide proofs like rent receipts, a rental agreement, and, in some cases, landlord details (e.g., landlord's PAN if rent exceeds Rs 1 lakh annually) to the employer and the revenue authorities upon requisition or if called for during the assessment proceedings, Surana added.
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income tax
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New Delhi, India, India
First Published:
July 10, 2025, 14:50 IST
News business » tax ITR Filing FY 2024-25: Your HRA Tax Exemption Claim Might Be Rejected Under These Circumstances
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