Lakhs of employed people leave their homes and live on rent in other cities for jobs. Such people can avail tax exemption on the money paid as rent under the Income Tax Act. However, there are some conditions attached to it. When you make HRA claim, many times the landlord does not have PAN. In many cases the landlord refuses to provide the PAN number. In such a situation, let us tell you that even if the landlord does not have a PAN card or refuses to give it, HRA can be claimed. Let us know how…
Tax benefits will be available in these cases
The condition for claiming House Rent Allowance i.e. HRA is that you are getting HRA from your employer i.e. your company. Meaning HRA should be a part of your salary. Apart from this, you should be paying rent on the house in which you are living. That house should not be yours.
The calculation will be done like this
The calculation of HRA exemption depends on three things. First, the actual amount received as HRA. Second, 50 percent of basic salary + DA in metro cities and 40 percent of basic + DA in non-metro cities and third, the amount after deducting 10 percent of basic salary + DA from the actual amount of rent. Tax exemption will be available on the amount which is lesser among the three. The HRA amount is deducted from the salary income. This way helps in saving tax.
PAN is imposed if the fare is more than this
To get tax exemption on HRA, you have to give the rent receipt and rent agreement to the employer. If the annual rent is more than Rs 1 lakh i.e. monthly rent is more than Rs 8,333, then according to the circular of the Central Board of Direct Taxes i.e. CBDT, it is mandatory for the employee to provide the PAN number of the landlord. Even if the landlord does not have PAN, the employee can claim HRA.
You can do this work if you do not have PAN card
In such a situation, the employee has two options. The first is that he will have to submit a declaration to the company, which the employee will have to get filled by the landlord. In this, the name, age and other details of the landlord have to be given. In this, the landlord declares that he does not have a PAN card, after which the company accepts it.
The taxpayer also has this option
There is also a possibility that the company may not agree to the declaration. In such a situation, the employee can claim HRA while filing income tax return. However, in this case the employee may receive a scrutiny notice. Since there will be a difference in the income reported by the company in Form-26AS and the income reported in the return filed by the employee. The Income Tax Department may ask about this difference. At that time the employee should have the rent receipt and rent agreement along with the landlord’s declaration.
Be sure to take care of this document
Many times landlords refuse to give PAN number or take rent in cash. In such a situation, registered rent agreement can help. For registration of rent agreement, name, address, duration of the agreement, rent amount along with PAN card and ID proof of the landlord and tenant are required. As soon as the rent agreement is used to claim HRA, the PAN information of the landlord will reach the Income Tax Department. Apart from this, the employee should pay the rent through cheque, net banking or UPI instead of cash.
These precautions will help
To claim HRA, rent agreement and rent receipt are necessary. Making payment through proper rent agreement and banking channel will facilitate the employee in claiming HRA. Also, this income from rent will be visible in the annual information statement of the landlord. In such a situation the landlord will have to pay tax. Otherwise it can be considered as tax evasion.
