Do you claim rent and home loan exemptions? You could be under IT scanner. Read how

The income tax department has adopted artificial intelligence (AI) for in-depth analysis of tax returns, and as a result, taxpayers are being questioned about suspect deductions related to house rent and housing loan interest. As per a report in ToI, Chartered accountants have highlighted cases where taxpayers falsely claim to live in rented properties owned by close relatives, while the actual rental income remains unreported by the recipients. Additionally, certain taxpayers are under scrutiny for making fraudulent housing loan interest claims. The rise in such practices is attributed to the high cost of living and education, coupled with limited available deductions.

According to sources within the income tax (I-T) department, AI enables the identification of patterns and anomalies, with house rent allowance (HRA) and home loan repayments emerging as key areas with discrepancies. Misuse of these heads is being closely examined, and other claimed rebates will also face scrutiny. The I-T department plans to assess the authenticity of claims by analyzing taxpayers' income profiles over the years.

Jainik Vakil, the chairman of the GCCI direct tax committee and a chartered accountant, told ToI the taxpayers should avoid advise from unqualified sources about rent deductions claim. While I-T returns are self-assessed, the department maintains a vigilant watch. To claim HRA deductions, salaried employees must furnish a rent agreement, rent payment receipts, and genuinely reside in the rented property, all of which are applicable only under the old income tax regime.


Some chartered accountants have expressed concerns that the current economic climate has left many salaried individuals struggling to invest and save on taxes. As a result, they may resort to dubious practices to reduce their tax liability. Notably, while filing returns for exemptions and deductions, no documentary evidence is required. Salaried employees often claim deductions under Section 80C for various expenses, making them more susceptible to temptations of tax evasion.

Chartered accountant Karim Lakhani told ToI that the government should consider increasing the basic exemption limit or standard deductions for individuals earning up to Rs 10 lakh per annum, given the rising inflation and financial constraints faced by many salaried individuals.