- By Aditya Pratap Singh
- Thu, 04 Apr 2024 02:45 PM (IST)
- Source:JND
ITR Filling 2024: Claiming income tax exemption on House Rent Allowance (HRA) is a common tax-saving method for a salaried individual, and it is also legal. However, the way of legally saving taxes through ‘HRA’ has recently come to the spotlight following the Income Tax Department’s unearthing of large-scale frauds in HRA claims through the misuse of PAN. In light of this development, even genuine and eligible persons have a lot on their minds. They feel that the Income Tax Department may increase scrutiny of HRA claims and they may have to face unnecessary queries.
In such a scenario, it is critical for people making HRA claims to be aware of what documents they will need to present in support of their claim if the Income Tax Department conducts an inquiry. All income tax filers should retain the evidence of all the exemptions/deductions claimed by them while filing their ITR. The following is the evidence that one should have to validate an HRA claim.
Rent Agreement
The tenant must have a valid rent agreement with his landlord. To make the rent agreement legally valid, TDS must be deducted from the rent if the monthly rent exceeds Rs 50,000. Therefore, it should be specified in the rent agreement that, if TDS applies to the rent, how it will be deducted. In addition, the rent agreement must contain all the basic information about the tenant and the landlord.
Rent Receipts
A valid rent agreement cannot be considered sufficient evidence to claim tax exemption on HRA. In addition, you should also obtain a receipt from the landlord for the payment of rent and keep it safe. Rent receipts are proof that the salaried employee paid rent during the relevant financial year. Even if the rent is paid through electronic means such as net banking, a rent receipt must be obtained. In fact, along with the rent agreement, rent receipts may also be asked by your employer.
Rent payment through bank
It would be best to pay the rent through electronic channels such as net banking and UPI instead of cash. The record of rent payments made through banks is also retained with the bank. Taxpayers can present the bank statement as proof of rent payment when requested by the Income Tax Department. Anyway, Section 269ST of the Income Tax Act, 1961, prohibits cash payments of Rs 2 lakh or more.
Landlord’s PAN
If your annual rent exceeds Rs 1 lakh, you must provide the landlord’s PAN details to claim tax exemption on HRA. Although the Income Tax Department does not ask for the landlord’s PAN while filing an ITR, you may have to provide its details if asked later. Therefore, you should keep a copy of your landlord’s PAN with you.
Renting to family members
Income tax laws do not prohibit renting to family members. But even if you rent to family members, you should keep important documents such as a rent agreement and rent receipt with you to prove the same, otherwise, the Income Tax Department may disallow the tax exemption of HRA. Additionally, the family member to whom you pay rent must report that rent income in their ITR.