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All You Need To Know About Rent Receipts

All You Need To Know About Rent Receipts

All You Need To Know About Rent Receipts

Rent receipt is an important document used as a proof of transfer of money as rent to the landlord along with being a key instrument for tax saving. Salaried taxpayers use rent receipts to claim House Rent Allowance (HRA) benefit in total taxable salary.

MakaaniQ takes you through how rent receipts can be used for saving tax and other in-depth information to understand the process.

Rent receipt for tax saving

Since rent receipts act as a proof of payment to the landlord, this can be used to avail of HRA exemption. If an individual is paying more than Rs 1 lakh as annual rent, then it is mandatory to quote landlord’s PAN in the declaration form.

Rent receipt format

While rent receipt for HRA exemption does not have a standard format, it should contain basic information, including landlord name, rent amount, address of the rented place, landlord’s PAN details and time period for which rent is received. The rent receipt should be affixed with revenue stamp if the cash payment exceeds Rs 5,000. Rent receipt for every month is not compulsory, employer may ask for rent receipt of atleast four months.

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Rent receipt is mandatory only if the employee receives HRA more than Rs 3,000. Generally employer asks for rent receipts on quarterly basis but employee can also provide it monthly, too. Also, affixing revenue stamp is mandatory if the cash payment is more than Rs 5,000. You need not affix revenue stamp if the rent has been paid in cheque.

Is landlord’s PAN mandatory?

Landlord’s PAN is compulsory if the paid rent is more than Rs 1 lakh annually or Rs 8,300 monthly. If the landlord does not have PAN, he has to give a declaration of the same.

If the total rent paid exceeds Rs 1 lakh annually, it is mandatory to quote landlord’s PAN to claim an exemption. However, if your landlord refuses to give his PAN, you cannot claim HRA for the rent paid beyond Rs 1 lakh and subsequently, your employer will deduct the TDS, accordingly. 

Can you claim HRA exemption at the time of filing Income Tax Return?

An individual can claim HRA exemption while filing ITR through following method:

  • Calculate the HRA exemption amount.
  • Deduct the exempted amount from the ‘Income Chargeable’ under the head salary. (Check column 6 of your Form 16, Part B)
  • Enter the amount calculated in step 2 under income from salary. For example, if your gross salary from Form 16 is Rs 7 lakh and you have HRA exemption of Rs 1 lakh, you can show salary income of Rs 7 lakh in ITR1 as Rs 6 lakh.

Can you pay rent to your parents for claiming HRA?

 Yes, you can claim tax exemption only if you have a rent agreement and rent receipts as proof of rent paid. Also, the receiver needs to declare the rental income in their annual tax return.

Can you claim HRA deduction if you don’t get it as a salary component?

Section 80GG allows taxpayers to claim a deduction in case you are not in receipt of HRA but still paying rent. A deduction allowed is least of the following case:

  • Rent paid minus 10 per cent of adjusted total income
  • 25 per cent of adjusted total income
  • Rs 2,000 per month

What is adjusted total income?

It is gross total income reduced by long term capital gain (if any), all deductions under section 80CCC to 80U, any income referred to in section 115A to D.

For declaring you are paying the rent, you need to fill out form 10-BA. Download it here.

Last Updated: Mon Jan 21 2019

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@@Fri Jul 05 2019 13:15:19