Relating to claiming Home Hire Allowance (HRA) exemption, salaried people typically discover themselves confused. In case you’re paying hire to your lodging and obtain HRA as a part of your wage, you may declare an exemption that reduces your taxable revenue. However how precisely are you able to declare the complete HRA exemption? And what paperwork do you might want to current as proof? Let’s break it down.
Key factors to notice
HRA in wage slip: HRA is a part of your wage and proven in your wage slip and tax projection assertion
Hire settlement & receipts: Each are obligatory for claiming HRA exemption
Proof of cost: Hire receipts are essential for proving precise hire funds
Assessing officer’s function: They’ll reject claims with out correct documentation
PAN requirement: Wanted if annual hire exceeds Rs 1 lakh
The fundamentals of HRA
HRA is proven in your wage slip and likewise within the tax projection assertion offered by your employer at first of the monetary yr. Because it’s a part of your wage, the HRA deduction can also be mirrored in Half B of Kind 16, which your employer supplies.
Nonetheless, for those who shift to the New Tax regime, the exemption for HRA is not going to be relevant.
Significance of hire settlement
“Whereas the absence of a hire settlement would not robotically result in the denial of HRA, taxpayers with out this doc might face challenges in substantiating their claims throughout tax assessments.
Subsequently, it’s advisable for taxpayers to take care of a hire settlement and different supporting paperwork to validate their HRA claims and adjust to tax rules,” says says Adhil Shetty, CEO, Bankbazaar.com.
He goes on to clarify, “Some employers would possibly permit HRA claims with no hire settlement, however this isn’t a normal apply. Even when your employer permits the declare with no hire settlement, the Earnings Tax authorities would possibly ask for it whereas processing your ITR. Within the absence of a hire settlement and enough proof of hire cost, they might deny your HRA exemption”.
Is a hire settlement sufficient?
You would possibly suppose that having a hire settlement is enough for claiming HRA exemption, however that’s not the case. In accordance with the revenue tax division, whereas a hire settlement is essential, it’s not sufficient by itself. Hire receipts are essential as they show that you just’ve truly paid the hire specified within the settlement. Maintain each paperwork useful, because the Earnings Tax Division might ask for them to confirm your declare.
Adhil Shetty says, “Merely signing a hire settlement doesn’t assure that rental funds have been made. There are instances the place people enter into hire agreements with members of the family however don’t truly conduct rental transactions. In such cases, the absence of hire receipts and proof of precise funds might result in the denial of the HRA declare”.
The function of the assessing officer
The revenue tax assessing officer has the authority to reject an HRA declare for those who fail to supply the mandatory documentation. They’re empowered to gather info and confirm the legitimacy of claims in tax returns. They’ll conduct inquiries and request further paperwork to make sure the claims are legitimate.
PAN card necessities for HRA exemption
In case your annual hire cost is under Rs 1 lakh, you do not want your landlord’s PAN. Nonetheless, if the hire exceeds Rs 1 lakh per yr, it’s essential to present your landlord’s PAN to your employer. For rents above Rs 6 lakh yearly, a ten% Tax Deducted at Supply (TDS) is required from the tenant.
“Your landlord’s particulars are obligatory because the PAN particulars of the owner permit tax authorities to cross-verify the rental revenue declared by the owner with the revenue reported of their tax returns. This helps be sure that landlords precisely report rental revenue and pay taxes on it,” Shetty says.
What in case your landlord doesn’t present PAN particulars?
In instances the place the annual hire exceeds Rs 1 lakh, sharing your landlord’s PAN along with your employer is necessary. In case your landlord doesn’t have a PAN, they should offer you a written declaration with their title and handle.
First Printed: Might 24 2024 | 3:33 PM IST
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