Belated Return and HRA Exemption Issues: How to Claim and Avoid Penalties
Filing income tax returns on time is crucial to avoid penalties and ensure that eligible deductions and exemptions, such as House Rent Allowance (HRA) exemption, are properly claimed. However, many taxpayers either miss the due date or delay filing, leading to a belated return. A belated return can impact HRA exemption claims, restrict deductions, and result in penalties.
In this article, we will discuss what a belated return is, how it affects HRA exemption, the challenges taxpayers face, and the best ways to rectify mistakes if HRA is missed while filing a belated return.
Table of content
What is a Belated Return?
A belated return is an Income Tax Return (ITR) filed after the due date specified by the Income Tax Department. The due date for filing an ITR for individuals is July 31 of the relevant assessment year (unless extended by the government). If a taxpayer fails to file within this timeframe, they can still file a belated return under Section 139(4) but with certain limitations.
Key Features of a Belated Return:
Can be filed after the original due date but before December 31 of the assessment year.
Subject to a late filing fee of up to ₹5,000 under Section 234F.
Loss of ability to carry forward losses except for house property losses.
Possible restrictions on claiming certain exemptions and deductions.
Belated Return and HRA Exemption: Challenges Faced by Taxpayers
Many salaried employees depend on HRA exemption to lower their taxable income. However, filing a belated return can sometimes lead to complications in claiming HRA exemptions. Here are the common issues faced:
1. Employer Did Not Consider HRA Exemption
Some employees fail to submit rent receipts or necessary proofs to their employer in time.
As a result, HRA exemption is not reflected in Form 16.
Filing a belated return further complicates rectification, as employers do not revise Form 16 after the financial year ends.
2. Higher Tax Liability Due to Missed HRA Claims
If HRA is not claimed, the entire HRA component in salary becomes taxable.
Filing a belated return makes rectification through Form 16 difficult.
This results in higher tax outgo, increasing the financial burden.
3. Risk of Scrutiny from the Tax Department
If a taxpayer tries to claim HRA exemption while filing a belated return, discrepancies may arise between Form 16, AIS (Annual Information Statement), and TIS (Taxpayer Information Summary).
This can lead to a tax notice under Section 139(9) for defective return.
How to Claim HRA Exemption While Filing a Belated Return?
Although filing a belated return presents challenges, HRA exemption can still be claimed by following these steps:
Verify Form 16 and Salary Slips
Check if the HRA exemption is already considered in Form 16.
If not, manually calculate eligible HRA exemption.
Keep Proper Documentation
Maintain rent receipts, lease agreements, and bank statements proving rent payment.
If rent paid exceeds ₹1 lakh per year, ensure that the landlord's PAN is mentioned.
Report HRA Under ‘Exempt Income’
Even if Form 16 does not reflect HRA exemption, it can be claimed while filing ITR under ‘Exempt Income’.
Avoid Mismatches with AIS and TIS
Cross-check Annual Information Statement (AIS) and Taxpayer Information Summary (TIS) to ensure that HRA exemption does not cause income mismatches.
Mismatches may result in scrutiny or a defective return notice.
Impact of Belated Return on Other Deductions and Exemptions
A belated return not only affects HRA claims but also restricts various tax-saving opportunities. Here’s how:
Deduction/Exemption | Impact on Belated Return |
HRA Exemption | Can be claimed manually but requires proper documentation. |
Section 80C (PPF, LIC, ELSS, etc.) | Allowed but should match Form 16 and AIS details. |
Section 80D (Health Insurance) | Still applicable but must be supported with valid premium payment proofs. |
Carry Forward of Losses | Not allowed except for house property losses. |
LTA (Leave Travel Allowance) | If LTA was included in Form 16 but not claimed in the original ITR, it may still be possible to manually report it under exempt income with supporting documents. |
What to Do If HRA Exemption Is Missed in a Belated Return?
If a taxpayer forgets to claim HRA while filing a belated return, there is no option to file a revised return. However, the following remedies may help:
1. File ITR U for Missed HRA
Under Section 139(8A), taxpayers can file an updated return (ITR U) to correct errors.
ITR U can be filed within 24 months from the end of the assessment year.
However, additional tax of 25% or 50% of the tax liability may be imposed.
2. Keep HRA Documentation for Future Scrutiny
If HRA is missed, ensure rent receipts and lease agreements are available.
These may be required if tax authorities request clarification.
3. Ensure Timely Filing in Future Years
Avoid last-minute ITR filing to prevent mistakes.
Submit rent receipts and HRA claims to employers before January to ensure proper reflection in Form 16.
Conclusion
Filing a belated return can lead to HRA exemption issues, higher tax liability, and loss of deduction benefits. While HRA can still be claimed, taxpayers must ensure proper documentation and accuracy to avoid tax scrutiny. To prevent such issues, timely filing, cross-checking salary details, and maintaining records are essential. If an HRA claim is missed, taxpayers should consider ITR U filing as a correction method.
Frequently Asked Questions (FAQs)
1. Can HRA exemption be claimed in a belated return?
Yes, but it must be claimed manually under ‘Exempt Income’ in ITR. Ensure all supporting documents are available to justify the claim in case of scrutiny.
2. Can a belated return be revised?
Yes, a belated return can be revised under Section 139(5) if filed before December 31 of the assessment year. If HRA is missed, taxpayers can file a revised return within this deadline. However, after December 31, only ITR U under Section 139(8A) can be used to update the return, which may involve additional tax liability.
3. What is the penalty for filing a belated return?
A late filing fee of ₹5,000 (if income > ₹5 lakh) or ₹1,000 (if income < ₹5 lakh) applies under Section 234F. Additionally, interest on unpaid tax may be levied under Section 234A.
4. How does AIS and TIS impact belated returns?
If HRA exemption in a belated return does not match AIS/TIS salary details, scrutiny or defective return notices may follow. Mismatches between reported salary and claimed deductions can trigger tax department inquiries.
5. Can I claim both HRA and LTA in a belated return?
While HRA can still be claimed manually, LTA (Leave Travel Allowance) generally cannot be claimed in a belated return unless it was included in Form 16 but not reported in the original ITR.
6. Can ITR U be used to claim missed HRA exemption?
Yes, ITR U allows taxpayers to update their ITR and claim missed HRA within 24 months from the end of the assessment year, but additional tax may be applicable.
7. What supporting documents are required to claim HRA in a belated return?
Taxpayers should keep rent receipts, lease agreements, proof of rent payments (bank transfers), and landlord’s PAN details (if rent exceeds ₹1 lakh per annum).
8. What happens if I miss the deadline for filing a belated return?
If the belated return is not filed before December 31, the taxpayer will have to file an ITR U under Section 139(8A), which involves additional penalties and interest charges.
9. Can self-employed individuals claim HRA in a belated return?
No, HRA exemption is only available to salaried employees. Self-employed individuals can claim rental expenses under Section 37(1) if applicable.
10. Will I get a refund if I claim HRA in a belated return?
If claiming HRA reduces tax liability, a refund can be processed. However, if filing ITR U, refunds are not permitted under this provision.
Related Posts
See AllThe "zero" income tax for individuals earning up to Rs. 12 lakh (or Rs. 12.75 lakh for salaried taxpayers with a basic standard deduction...
With the introduction of the new tax regime in FY 2020-21, taxpayers now have the option to choose between the old tax regime, which...
Tax planning is a crucial aspect of financial management that helps individuals reduce their taxable income while ensuring compliance...
Comentarios