ITR filing season: House Rent Allowance (HRA) is an allowance (part of CTC) provided by your employer to assist you afford the costs of living in leased housing.
HRA is a portion of your pay income, which is originally deemed taxable. If you reside in a rented house, you can claim a tax exemption, either partially or completely, under Section 10(13A) of the Income Tax Act. This is commonly known as the HRA exception. If you do not reside in a rental property, this allowance is entirely taxable.
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Now, if you are filing ITR and taking tax exemption in HRA, there are four documents that you need to keep safe. It is because some people also commit fraud in this, due to which if there is any doubt about anyone, the Income Tax Department sends them a notice. You may also receive such a notice, so to respond to it and keep yourself safe, it is important to have 4 documents with you. Let us know which four documents are necessary for you to have.
Let’s know about these documents.
Rent receipt
To claim HRA, you must have a valid rent agreement and a rent receipt. This implies you must also maintain the receipt for paying rent to your landlord. The rent receipt serves as proof that you paid the landlord’s rent. When claiming HRA, you must produce both the rent receipt and the rental agreement.
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Bank statement of online payment
Although no one asks you how you pay your rent, if you receive a letter from the Income Tax Department, you may require your bank statement. If you pay with cash, you will be unable to give this documentation. In such cases, several CAs and tax experts recommend that rent be paid online via UPI, net banking, or credit card. With this, you have irrefutable documentation of rent payments that no one can contradict.
PAN of landlord
You simply need the landlord’s PAN to file an ITR or claim HRA in the firm. This informs the Income Tax Department about who received the rent you paid. Even if you pay rent in cash, you must supply the landlord’s PAN; otherwise, you will receive less tax benefits. Let us inform you that if your total rent exceeds Rs 1 lakh, you must supply the landlord’s PAN; otherwise, you will be unable to claim HRA on the amount over Rs 1 lakh.
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Rent agreement
As a tenant, you must have a valid rental agreement. That implies you must get into a rental agreement with your landlord. Furthermore, you should keep in mind that the rent agreement must comply with income tax regulations. For example, if your monthly rent exceeds Rs 50,000, TDS must be deducted. It should be stated in the rental agreement whether or not TDS will be deducted from the rent and how. Aside from that, the rent agreement should include all fundamental information on both the landlord and the tenant. Furthermore, both should contain PAN details.
