Dealing with Fake HRA Claims: A Landlord’s Perspective in India

What does HRA mean?

House Rent Allowance (HRA) facilitates the formulation of salary packages for employees in India, which has a provision for deduction of tax for those who are renting their houses. Additionally, it is possible that individuals may try to falsify their expenses to have higher HRA claims and consequently reduce their tax obligations.

Fake Claims under HRA:

It is important to understand what’s behind HRA claims for supporting landlords. These false claims usually happen when tenants provide incorrect rent amounts so that they could increase their HRA deductions and decrease their income. This is usually done so that they can reduce their taxes. It also involves landlords, who might unknowingly get involved in the deception.

Measures That a Landlord Should Take to Protect Himself

To reduce the chances of being deceived by HRA claims, landlords can take the following precautions:

Screening tenants: The landlord should thoroughly check the background of their tenants, such as their job history, past, and references, before renting the property. By doing tenant screening, landlords can have an overview and predict which tenants can create legal issues in a later period of time.

Singing of Contract: A contract should be formed with all the essential details mentioned, such as payment schedule, lease term, etc. And it should be signed by the tenant with consideration for all the terms and conditions. So, in cases of non-compliance with terms and rules, the landlord has a legal right to take action.

Regular inspection of the property: Performing property inspections allow a landlord to carefully examine properties and spot any unauthorized occupants or subletting arrangements that might suggest fraudulent claims for housing benefits.

Documentation should be maintained: The landlord should prioritize managing all the documents that can act as evidence if any legal issue is present. By keeping records of such documents, it will help the landlord significantly during a court summons.

These are some steps a landlord should adopt so that he or she can lower the risk of becoming a victim of false HRA claims.

Legal procedures are available.

If there are any suspicions that tenants are making false claims for HRA, landlords have various legal options to deal with them:

Verification of rent receipts: Property owners get the right to demand copies of their rent receipts from their tenants and check their legitimacy. This may involve compiling the vouchers to ascertain the accuracy of the rent amounts, dates signed against the lease agreement, or performing a background check on the tenant.

Reporting to Revenue Authorities: When the landlord is sure that he has enough proof of wrongdoing in HRA claims, he will refer the issue to the Income Tax Department. Furthermore, providing the tax authorities with false documents through document forgery and inconsistency in rental agreements can always enable them to look into and prosecute the tax evaders.

Seeking Legal Assistance: Furthermore, landlords can also make court claims that fellow tenants might have named false things in the HRA application. Also, the landlord can report the fraud that is done by the tenants to the police; they can also go to court and file a complaint against the tenants on the basis of breach of contract.

What are the challenges faced by a landlord?

Various problems may arise when dealing with HRA claims for the landlords, even though the landlord has available legal solutions:

Problems regarding proof: Sometimes gathering enough evidence against their tenants can be annoying for the landlord. This evidence is important because, by using it, they can prove the false HRA claims made by the tenants.

Privacy of the tenants: Although the landlords have the right to check into any suspected activities, they also can’t disturb a tenant’s right to privacy, and the landlord should always comply with the legal regulations of a tenant-landlord relationship.

Time-Taking: It is a time-taking process as the legal procedure takes up time, which results in further expenses and a potential loss of income.

Revenge by the Tenants: Landlords should always be on their own, as tenants may try to get revenge against the landlord for accusing tenants of making false HRA claims. This could involve defamation lawsuits and property damage.