HRA, LTA, and Perquisite Errors: How TaxBuddy Deals With Salary Deduction Income Tax Notices
- PRITI SIRDESHMUKH
- Dec 19, 2025
- 10 min read
HRA, LTA, and perquisite mismatches in salary deductions often trigger income tax notices when the claimed exemptions do not align with Form 16, salary slips, or transaction records reported to the Income Tax Department. Most errors stem from incorrect calculations, missing documents, inflated claims, or discrepancies between rent receipts, travel proofs, employer valuations, and bank statements. These are flagged through Section 143(1) intimation or scrutiny notices, requiring timely clarification. Platforms like TaxBuddy reduce these discrepancies by validating salary breakup data, automating exemption checks, and ensuring claims match official records before filing.
Table of Contents
Understanding HRA Errors in Salary Deductions
HRA errors usually arise when the deduction claimed under Section 10(13A) does not match the income records available with the employer or the Income Tax Department. These discrepancies are often highlighted during automated processing, where exemption values are compared against salary components, rent receipts, landlord details, and bank transactions linked to rent payments. Even minor inconsistencies between Form 16 and reported rent proof can cause a mismatch, leading to demands or clarification notices. Errors also surface when exemption calculations exceed statutory limits for metro or non-metro cities, or when PAN details of the landlord are missing for higher rent payments.
Is HRA Allowed in the New Tax Regime?
HRA exemption is not available under the new tax regime (Section 115BAC) for most salaried taxpayers. Choosing the new regime means forgoing standard HRA benefits regardless of rent paid or place of residence, as exemptions and deductions are largely removed to simplify tax computation. Notices related to HRA in the new regime commonly occur when employees mistakenly claim the exemption or when employers continue reflecting the component in salary without adjusting the tax treatment.
How HRA Works in the Old Tax Regime
The old tax regime continues to offer HRA benefits based on the lowest of three values: actual HRA received, rent paid minus 10 percent of salary, or 50 percent/40 percent of salary for metro and non-metro cities. Proper documentation is essential, including rent receipts, rental agreements, and landlord PAN details when annual rent exceeds ₹1 lakh. Any deviation between claimed and eligible values, or inconsistencies in rent paid as reflected in bank transactions, increases the likelihood of scrutiny under Section 143(1).
Common Reasons for HRA-Related Income Tax Notices
Notices linked to HRA typically arise due to one or more of the following:
• Claims made under the new tax regime • Incorrect exemption calculation by the employee or employer • Rent payments not matching bank withdrawals or digital transfer records • Rental agreements missing or inconsistent with actual amounts • Missing landlord PAN for higher rent payments • Multiple residences claimed for overlapping periods • Inflated rent receipts unsupported by transaction proof
Automated systems now match income, rent transactions, and salary components, making discrepancies easier to detect.
How TaxBuddy Resolves HRA Mismatches
TaxBuddy verifies salary data, rent payments, and Form 16 entries using a structured review of bank statements and uploaded documents. AI-based checks ensure that exemption values follow statutory calculations and align with income-tax portal validations. When notices are issued, the platform helps prepare accurate responses by matching rent proofs, calculating correct exemption eligibility, and generating compliant supporting documents. This systematic approach reduces the risk of future notices and ensures that the exemption is applied correctly under the chosen tax regime.
Understanding LTA Errors in Salary Deductions
LTA deductions involve reimbursement of travel expenses for journeys taken with family members. Errors commonly occur when claims are made without valid travel proofs, or when declarations do not match the actual mode of travel permitted under Section 10(5). Salary slips may show LTA components that do not correspond to eligible travel or may reflect incorrect reimbursement values compared to supporting bills. Many notices are issued when flight or train fare limits are exceeded, or when the journey does not fall within the designated block year.
Is LTA Allowed in the New Tax Regime?
The new tax regime does not allow the LTA exemption. Any LTA claimed in a return while opting for the new regime typically triggers an error notice because the exemption becomes invalid. Even when employers include an LTA component in salary, the exemption is not permitted under Section 115BAC.
How LTA Works in the Old Tax Regime
In the old regime, LTA can be claimed for travel undertaken with family members, restricted to two journeys in a block of four years. The exemption applies only to actual travel costs equivalent to economy air travel or AC train fare for the shortest route. Expenses for accommodation, food, sightseeing, or road trips beyond the shortest route are not eligible. Documented proof of travel—tickets, boarding passes, invoices—is necessary to justify claims.
Why LTA Claims Trigger Income Tax Notices
LTA notices usually arise due to:
• Missing travel bills or incomplete documentation • Claims made even when no travel occurred • Bills not matching the permissible mode of travel • Claims exceeding fare caps for eligible routes • Journeys outside the allowed block year • Inclusion of non-travel expenses in the claim • Discrepancies between Form 16 entries and submitted proofs
Since travel claims are heavily dependent on actual bills, incomplete or inflated submissions lead to swift automated rejection.
How TaxBuddy Fixes LTA Documentation and Validation Errors
TaxBuddy reviews uploaded tickets, invoices, and travel proofs to validate eligibility and ensure compliance with Section 10(5). The platform runs AI checks to match Form 16 data with supporting documentation and eliminates mismatches before filing the return. If a notice is received, TaxBuddy prepares a structured response with the correct evidence, ensuring that all claims fall within permissible guidelines. Early detection reduces the likelihood of repeated errors in future filings.
Understanding Perquisite Errors in Salary Deductions
Perquisites include non-cash benefits provided by employers such as accommodation, concessional loans, domestic help, or amenities. These are taxable under Section 17(2) when their value exceeds specified limits. Errors occur when employers undervalue perquisites, employees misreport benefits, or salary slips show values that differ from Form 16 disclosures. Mismatches can appear during processing if the taxable value of perquisites is not aligned with valuation rules prescribed by the Income Tax Department.
Is Perquisite Exemption Allowed in the New Tax Regime?
The new tax regime does not permit most exemptions but continues to tax perquisites according to standard rules. Taxable perquisites must still be reported even when opting for Section 115BAC. Errors occur when employees assume that perquisite reporting is optional under the new system, leading to under-reported income and corresponding tax notices.
How Perquisites Are Taxed in the Old Tax Regime
Under the old regime, perquisites are added to taxable salary based on valuation rules. For example, employer-provided accommodation is valued at a percentage of salary, reduced by any rent recovered from the employee. Concessional loans, credit card payments, domestic help, and other amenities are similarly assessed. Specified employees, including directors and high-income earners, have additional reporting requirements. Any mismatch between these values and employer data increases the risk of notice.
Common Perquisite Valuation Errors Leading to Notices
Frequent triggers include:
• Incorrect valuation of employer-provided accommodation • Concessional loans not reported or undervalued • Employer-paid bills included in salary slips but missing in ITR • Employee contributions not deducted from perquisite value • Different values in Form 12BA and Form 16 • Missed perquisites for car facility, chauffeur salary, or club membership
Automated cross-checks now compare employer-reported data directly with ITR entries, increasing scrutiny.
How TaxBuddy Corrects Perquisite Reporting Issues
TaxBuddy analyses salary structures, Form 16 details, and employer-provided perquisite sheets to compute accurate valuations. AI-driven checks detect gaps between declared and actual values, ensuring that the return reflects the correct taxable amount. When notices arise, TaxBuddy prepares documentation and revised computations based on official valuation rules, helping taxpayers respond accurately and avoid penalties.
How Income Tax Notices for Salary Deduction Errors Are Processed
Income tax notices typically originate from automated processing under Section 143(1) when the claimed exemption or perquisite does not match employer filings or database records. The system compares Form 16, AIS, and salary components with the deductions claimed. Discrepancies generate an intimation that outlines the mismatch and revised tax computation. In more complex cases, scrutiny notices may be issued, requiring detailed proofs such as rent agreements, travel bookings, or valuation records. Timely responses help avoid additional interest or penalties.
How TaxBuddy Assists With Notice Responses
TaxBuddy provides structured guidance for drafting responses, assembling evidence, and uploading documents on the income-tax portal. The platform matches each claim with corresponding bank transactions, salary data, or employer-provided records. Expert review ensures that submissions are compliant and complete, reducing the chance of rejection. This support is particularly useful for resolving notices linked to HRA, LTA, or perquisite discrepancies, where accurate evidence and precise calculations are crucial.
Conclusion
HRA, LTA, and perquisite-related errors commonly occur due to mismatches between claimed exemptions and official salary or transaction data. Strengthened digital verification makes incorrect claims easier to identify, leading to more frequent notices for salaried individuals. TaxBuddy’s automated checks, document validation, and expert-assisted reviews help ensure that claims match statutory rules before filing, significantly reducing the risk of errors or non-compliance. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides a dual filing structure designed for different categories of taxpayers. The self-filing option supports salaried individuals with straightforward income by importing Form 16, validating data, and auto-checking common salary deductions. For those facing complex issues such as HRA mismatches, LTA documentation gaps, or perquisite valuation concerns, the expert-assisted plan ensures a trained professional reviews salary breakups, evaluates exemptions, and prepares compliant tax returns. Both plans use automated validation to reduce errors and minimise the chances of receiving income tax notices.
Q2. Which is the best site to file ITR?
The Income Tax Department’s official e-filing portal remains the primary utility for submitting income tax returns. However, many taxpayers prefer platforms that simplify compliance by analysing documents, correcting salary mismatches, and offering personalised assistance. TaxBuddy is widely used for its automated checks, seamless data import, and expert support, particularly for resolving issues related to HRA, LTA, and perquisite reporting. The platform reduces manual errors and offers clarity during notice-related situations.
Q3. Where to file an income tax return?
ITR filing is possible either through the government’s e-filing portal or through authorised digital platforms. TaxBuddy provides a streamlined alternative by importing salary data, cross-checking exemptions, and guiding users through each filing stage. The platform ensures that salary deductions, including HRA, LTA, and perquisites, match employer filings and Form 16, reducing the risk of mismatches during processing.
Q4. Why do HRA, LTA, or perquisite mismatches occur even when Form 16 appears correct?
These mismatches often occur due to inconsistencies between employee declarations and employer reporting. Rent paid may not match bank records, travel proofs may be incomplete, or perquisite valuations may differ from those prescribed under tax rules. Updated AIS and employer filings may reflect data differently from what employees assume is correct. Automated cross-checking by the Income Tax Department quickly detects such discrepancies and issues notices based on verified data rather than the employee’s earlier declaration.
Q5. What documents are required to respond to HRA-related notices?
Typical documents include rent agreements, rent receipts, proof of rent transfers through bank statements, and landlord PAN details for high-value rentals. The notice response must show that rent was genuinely paid and that the exemption calculation follows statutory limits. TaxBuddy’s notice support helps compile these documents, match amounts with salary records, and generate clarification letters aligned with assessment requirements.
Q6. What documents are needed to clarify LTA-related income tax notices?
LTA-related notices require submission of travel tickets, boarding passes, invoices from travel operators, and payment proofs. The journey must match the eligibility rules under Section 10(5), including mode restrictions and block-year criteria. TaxBuddy reviews travel records, validates eligibility, and prepares a structured response that aligns with permitted LTA exemptions to help ensure quick acceptance by the tax authorities.
Q7. How are perquisite mismatches resolved during assessment?
Perquisite mismatches are resolved by recalculating taxable values using official valuation rules for accommodation, vehicles, concessional loans, and other employer-provided benefits. Errors often occur when employees assume employer valuation is final, whereas assessment systems may compute values differently. TaxBuddy analyses salary slips, Form 12BA, and employer records to provide corrected valuations and prepares accurate notice responses.
Q8. What happens if salary deduction errors are not rectified after receiving a notice?
Ignoring a notice may lead to additional tax liability, interest under Section 234, and in some cases penalties. The revised computation issued through Section 143(1) may be treated as final if no valid response is filed within the deadline. Continued mismatches can also trigger scrutiny assessments. Timely response is essential, and platforms like TaxBuddy streamline this by organising proofs, validating data, and guiding compliant submissions.
Q9. Can HRA be claimed when living with parents or relatives?
HRA can be claimed when residing with parents or relatives, provided rent is genuinely paid and supported by a valid rent agreement and transaction proof. Cash payments without documentation generally lead to rejection and possible notice. Rent must flow through traceable banking channels. TaxBuddy often identifies whether supporting documents meet compliance standards before the exemption is claimed.
Q10. Are LTA exemptions applicable for international travel?
LTA is limited to domestic travel within India. International trips are not eligible under Section 10(5), and attempting to claim such expenses often triggers automated notices. Only actual travel tickets for journeys within the country, matching allowed travel modes and shortest-route criteria, qualify for exemption. TaxBuddy’s review checks travel patterns and ensures that claims adhere strictly to permissible rules.
Q11. Why do salary components differ between Form 16, AIS, and the employee’s records?
Differences arise due to variations in reporting cycles, employer corrections, delayed payroll adjustments, or changes updated later in AIS. Salary reimbursements and perquisites may appear in AIS even if not reflected in initial salary slips. These inconsistencies often create confusion during return filing. TaxBuddy compares all data sources and standardises values to prevent mismatches during processing.
Q12. How does TaxBuddy prevent future HRA, LTA, or perquisite-related notices?
TaxBuddy uses AI-driven checks to match salary breakup, bank records, declarations, and Form 16 data before filing the return. Errors in exemption calculations or missing documents are flagged early. The platform also ensures regime selection aligns with eligible deductions, preventing invalid claims under the new tax regime. Expert review provides an additional layer of verification, significantly reducing the chances of receiving notices in subsequent years.
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