Rent receipts are proof of transactions that happened between the landlord and the tenant. There have been cases where tenants have been denied HRA exemption, on the ground that there was no rent receipt available to substantiate the rental transaction. Salaried people who live in a rented property are allowed to reduce their tax liability by claiming tax deductions to the extent of eligible rent payment as HRA. The House Rent Allowance (HRA) benefit is available only if you live in a rented home. Let us first understand how HRA is calculated.
See also: Know about Section 80GG
HRA calculation
A salaried person can claim HRA deduction (under the old tax regime) to the extent of the least of the following:
- HRA actually allowed by the employer.
- For a person living in a metro city: 50% of Basic Salary + DA (Dearness Allowance)
- For a person living in a non-metro city: 40% of Basic Salary + DA
- Annual rent payment over and above 10% of annual salary + DA
Self-employed individuals and non-salaried personnel are not allowed to claim the HRA benefit.
Also read all about house rent rebate in income tax
See also our guide to know all about rent receipt
Why is a rent receipt essential for claiming the HRA benefit?
It is mandatory to provide the rent receipt to the employer, if the employee wants to claim HRA for rental accommodation with a rent payment of more than Rs 3,000 per month. If the rent payment exceeds Rs 1 lakh in a year, it is mandatory to provide the PAN details of the landlord to the employer.
In some cases, landlords may not have a PAN card. In such cases, the employee should take an undertaking from the landlord and get Form 60 filled and signed by the landlord. The undertaking and Form 60 should be submitted to the employer. In some cases, the employee pays a higher rent than mentioned in the rent receipt while paying the excess amount separately to the landlord. In such cases, the employer will calculate the HRA based on the amount mentioned in the rent receipt while ignoring the excess amount. So, the rent receipt is the crucial document, based on which the employer determines the eligible HRA benefit of the employee.
There are some cases in which the person lives with their parents and pays the rent to them. In such cases, it is very important to get the rent receipt from the parents, along with a rent agreement and the rent receipt for the rental transaction should be provided to the employer. Parents should show the rental income in their ITR and the rental transaction should match with the employee’s record.
Know all about the details to be included in a rent agreement sample
The rent receipt is also vital, when the employee owns a home but lives in a different city. In such a situation, the employee can get the HRA benefit with the help of rent receipt and also claim the tax deduction benefit against interest and principal payment on the home loan.
See also: All about the role of house rent slip in claiming income tax benefits
Important points to keep in mind before you claim HRA benefit
As already mentioned, HRA can be claimed only if you live in a rented home and a rental transaction has taken place with the availability of proper rental receipts. Fulfilment of the following conditions are essential for claiming the HRA benefit:
- The employee, his/her spouse or minor child, or in the capacity of HUF, should not own an accommodation.
See also: Can I claim HRA for different city?
- If a person owns a property and earns rent from such property, then HRA deduction cannot be claimed.
- The receipt should include the components such as the tenant’s name, landlord’s name, property address, rent amount, rent period, date of payment, mode of payment, PAN number of the landlord if the annual rent amount exceeds Rs 1 lakh, revenue stamp if the rent is paid in cash which amounts to more than Rs 5,000 and signature of the landlord.
See also: Know all about lease vs rent
FAQs
Is the rent receipt enough for HRA?
Yes, if the rent receipt contains all the essential information, then, it is sufficient proof to claim the HRA. A rent receipt is mandatory to claim the HRA, if the employee pays a rent of more than Rs 3,000 per month.
Can I still claim the HRA if I can’t submit the rent receipt at the time of declaration?
Yes, you can still claim the HRA benefit if you missed out on submitting the rent receipt at the time of declaration. You can claim the HRA at the time of filing the IT return.
Can I claim the HRA benefit if I live in my own house?
No, HRA benefit is only available for people who pay the rent. A valid rental transaction is essential to claim the HRA. One cannot pay rent to self and therefore cannot get the HRA benefit.
Amit Sethi is an accomplished professional with a distinguished background, holding an MBA in Finance. As an Independent Journalist and Data Provider with 20 years of invaluable experience, his expertise lies in meticulously covering stories on Real Estate, Personal Finance, Business and Banking. He writes journalistic content for leading media publications in India and also provides analytical data to real estate and fintech companies. Amit is driven by a purpose to disseminate insightful narratives, using verified information to empower individuals with financial literacy. Through his work, he aims to assist people in staying aware and making informed decisions that positively impact their financial well-being. Amit is a fitness freak, a marathoner and likes trekking.
