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As a beginner in your career or as an experienced professional, you must have been asked by your HR and accounts Departments for Rent Receipts. That’s the time when you start making the so-called jugaads with the help of your friends, relatives, colleagues, or seniors to get rent receipts. Most of the employees face difficulties in understanding the purpose of rent receipts or how to properly utilize them for tax benefits, and sometimes even make fake receipts to avail of the tax benefits. Providing these rent receipts to the accounts department or HR department has become a ritual that employees perform once a year, but never bother to get an in-depth understanding of this process. Rent receipts play an important role in helping you to claim the potential deductions while filing your Income Tax Return. Therefore, we have come up with this guide to help you understand all that you need to know about rent receipts and claim maximum HRA exemption.
To claim a House rent allowance (HRA), it is necessary to provide evidence of the payment of the rent to the employer; rent receipts work as evidence. The employer can provide deductions and allowances after verifying the same. The HRA allowance is based on the rent receipts and will be calculated accordingly.
Well, this is not a weird question to ask but a relevant & important question. One should have an understanding of rent receipt in terms of logic and its economics. A rent receipt is a proof of transaction of rent paid by a tenant to his/her landlord. The rent receipt(document) is provided by the landlord upon receiving the rent from the rentee, and his signatures are placed on it. If you have received the rent receipt, you should keep it with the documents you care about. Rent receipts can be used for legal matters( in case any) or tax benefits if you are eligible.
We can understand the elements of rent receipt by the following statement:
“The transaction of rent happens between tenant & landlord on a certain date each month for a premise having an address and rent of xxx amount for the period of a month.”
So, for each rent receipt to be valid, the following mandatory elements must be present in a rent receipt:
Other elements that are part of rent receipts:
PAN of the Landlord(not mandatory; mention only if annual rent exceeds Rs.1,00,000 in a year)
Revenue Stamp(where an amount exceeding Rs. 5000 is paid in cash)
If you are still confused about these details and would like to generate a rent receipt online,
CLICK TO GENERATE RENT RECEIPTS
India is a vast country having multiple languages, methods to document transactions, and different formats used by receipt book publishers; we have many formats/designs available in the market. Professionals/Employees often get confused due to these different formats available.
We are presenting you some of the formats we have found in India to help you understand that they are all same & serve the same purpose
For the convenience of our users, we are providing a facility to customize and download free printable rent receipts(valid format) from our rent receipt generator tool.
CLICK TO GENERATE RENT RECEIPTS
Many companies provide House Rent Allowance(HRA) to employees to meet the cost of living in rented accommodation. HRA is one of the biggest tax-saving avenues, as the complete amount of HRA is not taxable.
The least of the three amounts is tax-exempt -
In order to give you the benefit of HRA, the HR department needs to verify whether you have actually paid rent to allow HRA tax exemption.
Rent receipts act as proof that you have actually paid the amount and do not show any fake expenses to save tax.
I am sure you would agree with me when I say the landlords do not give the rent receipts even after paying the rent. So, what should we do in this situation?
Simple, just give the filled rent receipts to your landlord and ask him to sign them to acknowledge the receipt of rent.
There is no set format for the rent receipts for claiming the HRA exemption. Here’s the hack for getting one for yourself-
As per the Income Tax law of our country, every person who pays a salary is required to deduct tax at source(TDS), deposit with the government, and then pay the remaining amount to the employee. During this process, if any employee makes a tax-saving expenditure, then the person responsible for deducting tax has to consider and give the benefit of that expenditure and then deduct the tax on the net amount.
Practically, it has been observed that people submit fake rent receipts, even when they are not living in rented accommodation. So, to counter this, HR departments have started asking for rent agreements for giving HRA benefits.
Looking at the importance of rent agreements, here are 5 things to check in your rent agreement
Smart tactics to be followed at the time of drafting rent agreements-
First of all, my friends do not ask for a copy of the PAN Card. All you need is the PAN No. In Case your landlord does not have a PAN card, then take a declaration from him for the same and submit it to your HR.
Prevention is better than cure. When taking a house on rent, talk to your landlord in advance to share his PAN no.
There can be three situations when you are paying rent for the rented accommodation -
Notes: Condition A: Calculation of exempted HRA (Rent Paid - 1,80,000/-):-
A, B, C whichever is lower is to be selected as exempted HRA.
Condition B : You can still claim the tax benefit of HRA at the time of filing the return, as HRA is a part of your CTC. The only notional loss you will have to bear is more amount of TDS that will be deducted during the year.
Condition C : If HRA is not a part of your CTC, don’t be disheartened. You can still claim the deduction of rent paid at the time of filing the return u/s 80GG but upto Rs. 60,000 only.
Even if you forgot to submit rent receipts, you can still claim HRA while filing IT return. All you need is Rent receipts only.
Here is a step-by-step process for claiming HRA exemption-
If you satisfy these conditions, you can claim HRA tax exemption:
Although HRA is a part of the salary, unlike basic salary it is not fully taxable. A part of HRA gets exempted under Section 10 (13A) of the Income-tax Act, subjected to certain conditions. The amount of exempted HRA is deductible from the total income before arriving at a taxable income.
Yes, you can claim HRA tax exemption by paying rent to your parents. It is advisable to have a rent agreement. You would need rent receipts to claim HRA exemption. Also, your parents need to show rental income from you in their income tax return.
Yes, certainly. You can claim both. If you are staying in a rented house, then you are eligible to claim an HRA tax exemption. Simultaneously, if you have taken a house loan, then you can claim the house loan benefits too. If you have bought a house with the help of a home loan and live in another house on rent, you can claim tax benefits for both. But if the house you bought and the house you live in are in the same city, you should have a genuine reason for not living in the house that you own to prove to Income Tax Officer. The reasons could be that the house you own is too far from your workplace, or the commute is very difficult.
No, you cannot enjoy the tax benefits of HRA if you live in your own house. One cannot pay rent to oneself. Hence, no exemption is available for HRA, and the whole of HRA received becomes taxable under “Income from Salary.” But if you reside in a rented property, then you can claim an exemption even if you own a house (in the same city or in a different city).
In the case of LTA, the employer reimburses the travel expenses for the vacation taken by an employee. However, any other expense, such as food, shopping, lodging, etc., is not included in the exemption. Available for only two children of an individual born after October 1st, 1998, including a step or adopted child.
Traveling Twice in a block of Four years is allowed. The current block is 2022-25.
Mode of travel should be air, rail, or any other public mode of transport.
Allowed for domestic travel and not for international travel.
Normally, the Tax benefit of HRA cannot be claimed by paying rent to your spouse. So, if you are staying in a house owned by your spouse, then HRA exemptions are not available to you. However, if you still wish to claim exemption, you should be ready for litigation as Income Tax Officer might have a different view.
Yes, why not, provided both are paying rent. Also, it will be better if the landlord issues two separate rent receipts or specifies the proportion of rent borne by each person on the rent receipt.
HRA, or House Rent Allowance, is an allowance that salaried individuals receive from their employer for meeting the rental expenses of their house. The amount received is partly exempted from tax for the employee who is residing in a rented house. In case the employee lives in his/her own house and does not pay any rent, the entire amount would be taxable.
To ensure that your House Rent Allowance (HRA) claim is not rejected, you should take the following steps and provide the necessary supporting documents:
Hope this article helped you to learn a lot about rent receipts and their significance in claiming HRA exemption. If you have already generated your rent receipts using tax2win’s rent receipt generator, it's time to file your income tax return with tax2win and get a seamless ITR filing experience. And if you feel you can’t do it on your own, don’t worry, our expert CAs are here to help. Book an eCA now!
This could be possible only when you live in both the houses in a particular year for proportionate months.
As per Section 10(13A) of the Income Tax Act, 1961, exemption of House Rent Allowance is available to the employee for the rent paid in respect of the property which is occupied by himself. Hence, rent paid for the house where your family is living cannot be claimed as an exemption in this case.
Even if the employer fails to provide HRA exemption benefits of the previous employer and deducts higher tax as TDS, the assessee can still avail the benefit of HRA exemption at the time of filing of return and claim a refund of such excess tax deducted.
If you give multiple receipts on papers with different serial numbers or on a statement that doesn't show the balance before and after the payment was received, then you're asking for trouble as it could be claimed that they gave you an extra payment and you may be asked by the tax department to include that in your income.
If you are receiving HRA in one state, being the state in which you are working, then you cannot claim the exemption for payment of rent in another state. You can only claim the rent paid in the city of employment for the claim of HRA.
A stamp needs to be affixed on receipts if payment is made in cash more than Rs. 5000. Revenue stamp on a rent receipt makes it a legal document. It means that payment has been received by the recipient and paid by the payer. In case you have submitted rent receipts without a stamp, employee will reject it and request you to resubmit it with proper stamping.
HRA can be claimed by you and your friend in the same proportion of rent payment.
Yes, the Income tax department can track your details as Form 16 is in sync with the ITR form, which will help the Income Tax Department in electronically matching the data reported in ITR.
No, the rent receipt should have the PAN of the person who has paid the rent and not of anybody else.
No, HRA should be deducted from the total Taxable Salary.
Yes, You can claim both HRA exemption and home loan benefits.
If you are not getting the benefit of House Rent Allowance and you have not claimed any expense for rent paid under any other section of the income tax act, then you can claim a deduction under Section 80GG.
