Income Tax – If you are a taxpayer then this news is for you. Let us tell you that the rent agreement is important but it may not be a sufficient document in itself to claim HRA exemption in tax. Rent receipts serve as proof that the employee has actually paid the rent amount as mentioned in the rent agreement.
Tax Saving Tips On HRA: To save tax on salary, companies will soon start asking employees for investment and expenditure proof for tax-saving. People living on rent can claim tax exemption through the House Rent Allowance (HRA) option. If given by the employer as part of salary. But a question arises whether both rent receipt and rent agreement are necessary as proof to make a claim?
According to experts, the rent agreement is important but it may not be a sufficient document in itself to claim HRA exemption in tax. Rent receipts serve as proof that the employee has actually paid the rent amount as mentioned in the rent agreement. Therefore, it is advisable for an employee to retain the rent receipts along with the rent agreement and produce the same before the assessing officer when enquired.
Is rent receipt necessary?
It is important to have proof of tax exemption or deduction claimed while filing Income Tax Return (ITR). This is because the Income Tax Department may ask the individual for proof of the claims made in the ITR. The Income Tax Department may ask for documentary proof when the ITR is processed. The Assessing Officer has various powers to collect information and verify the validity of the claims in the ITR of the taxpayers. They can make inquiries or request necessary documents for this purpose.
The employee will be allowed exemption for HRA if he resides in a rented accommodation and actually pays rent in respect of such residential accommodation. The rent receipt serves as evidence of payment of rent to the landlord. Therefore the rent receipt should be collected from the landlord. Even if the fare is paid through electronic means.
What should be recorded on the house rental receipt?
As tax experts point out, one must have rent receipts and rent agreement to provide documentary evidence of rent paid. The name of the landlord should be mentioned in the rent receipt. Address of the landlord, amount paid along with TDS deducted (if applicable) and mode of payment (cash or electronic). If the monthly rent payment in cash is more than Rs 5,000 then put a revenue stamp.
How to claim HRA tax exemption?
Employees are eligible to claim HRA tax exemption if they have received HRA from their employer. Are living in a rented apartment and have actually paid rent during the financial year. They can claim HRA tax exemption by submitting proof of rent payment to the employer and obtaining the tax exemption in Form 16 issued by the employer.
Alternatively if the proof has not been submitted to the employer then HRA tax exemption can be claimed in the ITR while filing it. Here, if the Income Tax Department accepts your claim then there is no need to submit proof to them. However, if the Assessing Officer raises doubts, it is necessary to provide proof of the exemption claimed.
What to do if the annual rent is more than Rs 1 lakh?
The proof must be submitted on time (as specified by your employer) to avoid additional tax deducted at source (TDS) from your salary income. Provided that you have opted for the old tax system. Employees must mandatorily provide PAN or Aadhaar to the landlord employer if the total rent paid in a financial year exceeds Rs 1 lakh. If the monthly rent is more than Rs 50,000 then the person paying the rent will have to deduct TDS on the rent.
