House rent allowance (HRA) is typically a part of an employee’s salary. This salary component is taxable under income tax laws in India even though tax deduction to a certain limit is offered. To save tax on the HRA component of your salary, you have to provide recent receipts as the proof to your employer every year. This is true if a tenant is paying more than Rs 3,000 as monthly rent. Therefore, your employer insists that you produce the documentary proof of paying the rent every quarter, failing which a high amount of tax is deducted from your salary.
What is a rent receipt?
A rent receipt is a formal document provided by a landlord to a tenant as proof of rent payment. It typically includes details such as the amount paid, the date of payment, the rental period, the tenant’s name, and the property address. Rent receipts serve as evidence for both parties—tenants can use them for record-keeping or tax purposes, while landlords can refer to them in case of disputes or for tax deductions.
Benefits of a rent receipt
A rent receipt offers several advantages for both tenants and landlords:
- Proof of payment: It serves as an official record of rent payments, helping tenants avoid disputes with landlords over non-payment.
- Tax purposes: Tenants can use rent receipts to claim tax benefits under Section 80GG of the Income Tax Act, which allows deductions for rent paid.
- Legal protection: In case of any legal dispute, rent receipts act as evidence of regular rent payments, safeguarding tenants from eviction claims.
- Transparency: Rent receipts provide clarity about the rental amount, payment dates, and any adjustments made, ensuring a transparent landlord-tenant relationship.
- Financial record keeping: Both parties can maintain organized financial records, useful for future reference, loan applications, or during property transactions.
Details included in rent receipts
The following details should always be clearly specified in a rent receipt:
-
- Receipt number: A unique reference number for the rent receipt to facilitate easy tracking.
- Issuance date: The date the receipt is issued.
- Landlord information: The name, address, and contact details of the landlord or property manager.
- Tenant information: The name, address, and contact details of the tenant.
- Rental property information: The address of the rental property, including unit numbers or any specific description if applicable.
- Payment information: The rent amount paid, the method of payment (such as cash, cheque, or online transfer), and the payment frequency (monthly, weekly, etc.).
- Late charges: Include any applicable late fees or penalties, if relevant.
- Signatures: A space for both the landlord and tenant’s signatures to acknowledge the payment.
Is providing rent receipt mandatory to claim HRA exemption?
Yes, according to the government, “though for purposes of grant of house rent allowance, a rent receipt may not be insisted upon by the government, it is necessary for granting the exemption under Section 10(13A) that the employee should have actually incurred the expenditure on rent”.
“For purposes of deduction of tax, the disbursing officer should ensure that the employee concerned has in fact incurred the expenditure on rent. The payment of rent should be verified through rent receipts in the cases of all employees,” a circular issued by the income tax department says.
How much of your HRA is tax-exempt?
You can claim a tax exemption on a portion of your HRA under Section 10(13A) of the Income Tax Act. The deductible amount will be the lowest of the following:
- The actual HRA received
- 50% of your salary if you reside in a metro city
- 40% of your salary if you reside in a non-metro city
- The actual rent paid minus 10% of your annual salary
Eligibility criteria for claiming HRA exemption
To claim HRA exemption, an individual must meet specific conditions. The applicant should be a salaried employee receiving HRA as part of their salary structure. They must be residing in a rented accommodation and paying rent to a landlord. The exemption applies only if the employee does not own a house in the same city where they work. If the annual rent exceeds Rs 1 lakh, the landlord’s PAN details must be provided. Additionally, employees who stay with their parents and pay rent to them can claim HRA, but proper documentation is required to avoid rejection.
When is a rent receipt submitted?
If you are claiming HRA for rental accommodation with a monthly rent exceeding Rs 3,000, it is mandatory to provide rent receipts to your employer as proof of payment. This applies even if you are paying rent to your parents. Employers typically request rent receipts before the financial year ends, usually between January and March. Regardless of whether you pay rent via credit card or online transfers, you must obtain rent receipts from your landlord and submit them to claim HRA deductions.
Are monthly rent receipts needed?
No, rent receipts can be submitted for an entire quarter i.e. for 3 month period, for half-yearly period or for an annual period according to the financial year. Remember that for income tax purposes, expenses are considered on a financial year basis and not the calendar year basis.
Rent receipt format
Rent receipt format is based on identification details of the landlord and tenant, monthly rent amount and address of the rented property. Here’s what a typical rent receipt looks like:
Customisable rent receipt templates
Rent receipt format
(Under Section 1 (13-A) of Income Tax Act)
Received a sum of Rs. (in figure)____________________________ (Rupees_________(in Numbers)_______ ________________________________________________________________________
Towards the rent @____________________ per month from ___________________ to __________________ in respect of House No.____________________________ _________________________________________________ situated at ____________
_______________________________________________________________________
(Affix Revenue Stamp of Rs.1/-)
Date: Signature of the House Owner
Name:
Address: _____________________
______________________________
______________________________
Read more about rent receipt and HRA exemption
Rent receipt sample
Here is the basic template of rent receipt.
Rent receipt Hindi sample
Here is the basic template of rent receipt in Hindi:
Click here to download rent receipt sample PDF
Rent receipt format (filled)
Also read about rent receipt and tax benefits
Is a revenue stamp required on a rent receipt?
A revenue stamp is required on rent receipts if the cash payment exceeds Rs 5,000 per receipt. However, if the rent is paid via cheque or online transfer, a revenue stamp is not necessary. The value of the revenue stamp used on a rent receipt is Rs 1 per receipt. You can obtain revenue stamps from local post offices, stationery shops, Amazon, or other vendors.
Rs 1 revenue stamp for rent receipt
Is providing the landlord’s PAN necessary to claim HRA exemption?
Tenants paying a monthly rent of Rs 8,333 or Rs 1 lakh per year must provide their landlord’s PAN to claim HRA deductions. In addition to quoting the PAN, a self-attested copy of the landlord’s PAN must also be submitted along with the rent receipt.
What if I fail to submit rent receipts to my employer?
In case you fail to submit rent receipts on time, your employer will deduct the entire amount taxable as TDS according to your tax slab. However, you can claim HRA exemption in your ITR. For this, you will need to calculate the exempt HRA amount manually.
What if your landlord refuses to provide a rent receipt?
If your landlord refuses to issue a rent receipt, consider these alternatives:
- Request a written agreement: A rental agreement mentioning the rent amount can serve as proof.
- Bank transaction records: Rent payments made via bank transfers or UPI can act as supporting evidence.
- Affidavit declaration: In some cases, a self-declaration affidavit may be accepted for HRA claims.
- Communicate with your landlord: Explain that rent receipts are essential for tax benefits and do not impact their income tax unless rent exceeds Rs 1 lakh annually.
Digital rent receipts for easy record-keeping
Tenants don’t have to go the old way to buy rent receipts from vendors. These days, online service providers offer the facility to generate digital rent receipts online. Using the Housing Edge app, for instance, landlords and tenants can easily generate rent receipts free of cost.
Important considerations for generating a rent receipt
Here are some crucial things to remember when generating a rent receipt for tax purposes:
- To ensure the validity of your rent receipt, it’s crucial to have a formal rent agreement in place. The agreement should outline all key details, including the monthly rent, lease duration, and any utility bills associated with the property.
- If you’re sharing accommodation, the agreement must specify the number of tenants and how rent and utility costs are divided among them.
- Paying rent online is recommended, as it provides a clear record of transactions.
- Always request a rent receipt with a revenue stamp, as it holds legal validity, especially when claiming tax exemptions like HRA. Rent receipts are necessary for claiming HRA exemption if your monthly rent exceeds Rs 3,000.
- For annual rent payments above Rs 1 lakh, you’ll need to provide your landlord’s PAN to your employer. If the PAN is unavailable, your landlord must provide a declaration, and you should obtain a filled ‘Form 60’ for submission to your employer.
- In some cases, employees may pay rent higher than what’s mentioned in the agreement. In such situations, tax exemptions will be based on the rent receipt provided by the employee, not the original agreement.
What are fake rent receipts?
Fake rent receipts are counterfeit documents that falsely indicate rent payments were made. These are often used for deceptive purposes, such as:
- Tax evasion: Individuals might use fake rent receipts to claim tax deductions for rent payments they never actually made, thereby lowering their taxable income and reducing their tax liability.
- Tenant verification: Some people may submit fake rent receipts when applying for loans or other financial services to inflate their income and enhance their eligibility.
- Landlord fraud: In certain instances, landlords might issue fake rent receipts to help tenants claim tax benefits or subsidies, or to mislead authorities about the actual rental income received.
Penalty for fake rent receipts
The penalties for submitting fake rent receipts can vary based on the jurisdiction and the seriousness of the offense:
- Civil penalties: You could be sued by the landlord or property management company for damages, including unpaid rent or any financial losses caused by the fraudulent activity.
- Tax penalties: If fake rent receipts are used to claim tax deductions, you may face penalties from tax authorities, including fines and interest on unpaid taxes.
- Criminal charges: Falsifying documents, such as rent receipts, may be considered a criminal offense. If convicted, penalties could include probation, fines, community service or even imprisonment, depending on the severity of the fraud and local laws.
- Reputation damage: Being caught using fake rent receipts can harm your reputation, especially in professional or business settings. This could affect future rental opportunities, employment prospects, or relationships with financial institutions.
How to avoid rejection of your HRA claim?
To avoid rejection of your HRA claim, follow these steps and provide the necessary documentation:
- Genuine rent payment: Ensure that you are paying rent to a landlord, not a close relative, for the accommodation you are claiming under HRA.
- Rent agreement: Retain a copy of your rent agreement as proof of your tenancy.
- Rent receipts: Collect and keep original rent receipts from your landlord, which should include the landlord’s name, address, rent amount, and the rental period. Make sure the receipts are signed by the landlord.
- PAN of landlord: If your annual rent exceeds Rs. 1,00,000, provide your employer with the landlord’s Permanent Account Number (PAN). Failure to do so may result in the rejection of your HRA claim.
- HRA component in salary: Verify that your salary structure clearly lists the HRA component.
- Actual residency: Ensure that you are genuinely living in the rented property, rather than just obtaining rent receipts for tax-saving purposes.
- Form 12BB: Submit a statement of your rent receipts to your employer using Form 12BB to claim HRA benefits, which is generally required for income tax filing.
- File ITR with correct details: Accurately report HRA details in the appropriate section of your Income Tax Return (ITR) form.
- Proof of payment: If you pay rent in cash, keep records such as bank statements or withdrawal slips to verify these transactions.
- Timely filing: Submit your income tax return within the deadlines set by tax authorities.
- Consistency in information: Ensure that the information in your tax return matches the details in your supporting documents to avoid discrepancies.
Housing.com POV
Rent receipts play a crucial role in claiming HRA tax exemptions, ensuring compliance with tax laws, and maintaining transparency between tenants and landlords. Providing accurate and timely rent receipts, complete with necessary details such as payment amount, rental period, and landlord’s PAN, is essential to avoid disputes and ensure seamless HRA claims. Whether generated digitally or manually, rent receipts act as reliable proof of payment and safeguard tenants’ rights while fulfilling statutory requirements. By following the guidelines for rent receipts, tenants can maximize their tax benefits and maintain a harmonious landlord-tenant relationship.
FAQs
Can rent receipt be generated online?
Yes, tenants can generate receipts online for free, using online rent receipt generators on various platforms
Are online copies of rent receipt valid?
Yes, if the rent receipt carries all the information and signature of the landlord, it can be submitted to the employer as a soft copy.
What to include in a rent receipt?
Rent amount: The exact amount of rent must be mentioned. Rental period: The time period (e.g., month and year) that the payment covers. Date of payment: The date when the rent payment was received. Tenant name: The full name of the tenant who made the payment. Landlord’s name or property manager’s details: The name of the landlord or the managing agent who receives the payment. Payment method: How the payment was made (e.g., cash, check, transfer). Property address: The address of the rental property. Receipt number: A unique identifier for the receipt, useful for record-keeping. Signature of the receiver: The signature of the landlord or the person who received the payment.
What if the landlord refuses to give a rent receipt?
Doing so would amount to violation of tenant rights. Tenants should first request the receipt in writing and cite local laws if necessary. If the issue persists, legal advice might be needed.
Do rent receipts need to be notarised?
No, rent receipts do not need to be notarised.
| Got any questions or point of view on our article? We would love to hear from you.Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
