Why Do We Need Rent Receipts?
Rent Receipts & Its Benefits:
Do you have any idea how useful a rent receipt is for you? Let’s learn this in this blog. One can fully utilize rent receipts for income tax purposes. Also, they’ll need these receipts to claim HRA. Let’s understand what this rent slip is and why you need it.
Understanding- what is a Rent Receipt?
A tenant needs to know what a rent receipt is. Well, it is an important document for a tenant as proof of payment to the landlord.
- It means that the tenant has paid the rent to the landlord for that specific month.
- This receipt consists of crucial information such as the name of the tenant and landlord, the date of payment, the rent paid, and the property’s address.
- It is a necessary document for both the tenant and the landlord in many aspects.
In India, this receipt is of great importance as it can be by the tenants for income tax purposes. The tenants can use this rent receipt India to claim a tax deduction for the rent in their office.
Rent Receipts Sample:
Rent receipt for income tax purposes-
With the rent receipt, a salaried person will be able to get an exemption on their Form-16. It will also help in preventing additional issues when submitting income taxes. Put another way, a salaried person can submit a claim for House Rent Allowance (HRA) benefits by using the rent receipts as proof of total taxable pay.
Important points about the rent receipts to claim HRA:
- The salaried person needs to submit the rent paid receipt for all the months to claim HRA.
- You’ll also need a revenue stamp along with the rent receipts in case you are paying rent of more than Rs. 5000 per receipt in cash.
- You don’t need a revenue stamp if you’re paying the rent through cheque.
- When the annual rent paid exceeds Rs.1,00,000 per year, then it is necessary to ask for the AN No of the landlord. With this, you can claim an HRA exemption in your office. In case you don’t have the landlord’s PAN No for any reason, you won’t be able to claim the HRA benefits and your TDS will be deducted accordingly.
Why do we need rent receipts?
Why is rent pay slip important? From serving as evidence of clear rent payment to claiming HRA, there are several benefits that you can get with this slip. Let’s see why you need a receipt:
- Helps to settle disputes
Many times, we see arguments between the tenant and the landlord about the rent. This is a written proof that means the tenant has cleared the rent. So, there will be no dispute between the landlord and the tenants.
- Helps to save taxes
The rental receipt for income tax is another important reason why you need this slip. In India, a person has to pay a certain amount as income tax when the salary is more than Rs.2.5 lakhs. So, it is the best solution that you can do to save tax by claiming your House Rent Allowance.
This implies that to be eligible for the HRA exemption you must present a rent receipt. For this, there are two conditions to fulfill which include- living in a leased home and receiving HRA as part of your income.
- Rental agreement receipt helps to maintain a record
Rental agreement receipts are crucial for both the landlords and tenants in maintaining a record to avoid any confusion or conflict. With this receipt, the landlords can monitor their revenue and maintenance costs.
When you rent a house, tenants can either pay in cash or cheque. The rent slip is evidence that you’re paying your rent regularly especially if the tenant is paying in cash. The tenants will get the receipt to document the rental transaction. You need to have proof that you are paying rent otherwise the landlord might evict you in case of no evidence.
Apart from this benefit, the rent receipt will also help in building a strong sense of trust. The rent slip also makes you a good tenant who pays the rent right on time. If you have the original rent receipt proof then it becomes easy to get a house for rent.
What is HRA?
House Rent Allowance (HRA) is a part of the salary given by an employer to his employee for his rented accommodation. HRA exemption can be claimed only if the employee is living in a rented house.
What are the necessary documents required to claim HRA?
To claim HRA, you are asked to submit important documents like rent receipts, rent agreement to your employer before the end of the financial year. If the amount of rent exceeds Rs 1 lakh/annum, the PAN No of the landlord is also required. This will help you get exemption in your form-16 and you can avoid further troubles during your Income-tax return filing.
Why rent receipts are required by a salaried person?
This will help them get exemption in their form-16 and they can avoid further difficulties during their Income-tax return filing. In another word, a salaried person uses rent receipts to claim House Rent Allowance (HRA) benefits in total taxable salary.
Why do I need to take a rent receipt from my house owner?
It is an important document used as evidence of the transfer of rent to the house owner.
What are the necessary elements of a rent receipt?
- Date of Payment
- Rental Period
- Tenant Name
- Landlord Name
- House Address (for which you are paying rent)
- Signature of Landlord
- PAN No of the Landlord (if annual rent exceeds Rs.1,00,000 in a year)
- Revenue Stamp (if amount paid in cash more than Rs 5,000)
Is rent receipt mandatory for claiming HRA?
Yes, the rent receipt is a mandatory document to claim HRA. If an employee receives HRA in excess of Rs. 3000/month, it is necessary to present rent receipts to the employer for claiming HRA. Even if your HRA is less than Rs. 3000/month, try to keep rent receipts with you in case the officer asks for them at a later date.
Why should I need to submit rent receipts to the HR Department?
As per the Income Tax rule of India, every person who pays salary is required to deduct tax at source(TDS), deposit with the government and then pay the remaining amount to the employee. During this process, if any employee makes a tax saving investment then the person liable for deducting tax. He has to consider and give the benefit of that investment and then deduct the tax on the net amount.
Usually, it has been seen that people present fake rent receipts, even when they are not living in rented accommodation. So, to counter this, HR departments have begun asking for rent agreements for giving HRA benefits.
Is there any last date fixed for submitting rent proof to the employer?
Normally, every employer has its own last date or deadline by which all investment proofs documents must be submitted. Extra TDS will be deducted from your take-home salary if you miss the deadline. However, you can claim the extra TDS deduction directly from your income tax return.
Who can claim HRA exemption?
If you meet the following conditions, you can claim HRA tax exemption:
- You should be a salaried person.
- You must accept HRA as a part of your salary package/CTC.
- You should live in rented accommodation.
Can I claim both home loan deduction and HRA?
Yes, If you are a homeowner and you are paying back your home loan, you can claim HRA if you live in a rented property. You are allowed to get both the benefits to reduce your taxable income.
What are the important points to check in your Rent Agreement?
Important points to check in your rental agreement are:-
Rent agreement should be on Rs 500 stamp paper or as per the stamp rate prevailing in your state.
It can be registered for 11 months only. For more than 12 months, the rent agreement is not registered instead lease deed is to be favored which requires registration.
Every year, the rent agreement is renewed after 11 months with the revised rent.
Both landlord and tenant are required to follow the notice period as mentioned in the agreement.
How payments of rent help us in saving tax?
There can be three circumstances when you are paying rent for your rented accommodation:-
- When HRA is a part of your CTC & you submit the rent payment proof to your HR
- When HRA is a part of your CTC & you forget to submit the rent payment proof to your HR
- When HRA is not a part of your CTC
What to do when your landlord refuses to give his/her PAN No?
Landlord’s PAN is compulsory if the paid rent is more than Rs 1 lakh annually or Rs 8,300 monthly. If the landlord does not have PAN No, he has to give a declaration for the same.
If the total rent paid exceeds Rs 1 lakh annually, it is necessary to quote the landlord’s PAN No to claim an exemption. However, if your landlord refuses to give his PAN No, you can’t claim HRA and finally, your employer will deduct the TDS, accordingly.
Can I pay rent to my parents and claim HRA?
Yes, you can claim the HRA exemption by paying rent to your parents. But it is always advisable to have a rent agreement. You would need rent receipts to claim HRA exemption. Also, your parents need to show rental income from you in their income tax return.
Can HRA be claimed for paying rent for 2 houses?
This could only be possible when you live in both the houses in a specific year for proportionate months.
Can you claim the HRA deduction of a non-salary component?
Section 80GG enables taxpayers to claim a deduction in case you are not in receipt of HRA but still paying rent. A deduction is allowed in the following situation:
Rent paid minus 10% of adjusted total income
25% of the adjusted total income
Rs 2,000/month
Can HRA be claimed by both wife and husband?
Yes, because both are paying rent. But it will be better if your landlord issues two separate rent receipts or defines the proportion of rent paid by each person on the rent receipt.
Can I claim both HRA and a home loan?
If you have bought a house with the help of a home loan and live in another house on rent, you can claim tax benefit for both. But if the house you bought and the house you live in is in the same city and you should have a valid reason for not living in the house that you have, to prove to Income Tax Officer. The reason could be that the house you own is too far from your workplace, or traveling is very difficult during pick hours.
Can HRA be claimed if I own a house?
No, you can’t enjoy the tax benefits of HRA if you live in your own house.
What happens when I stay in a rented home for only a few months?
Yes, you can only claim the HRA exemption for the months you paid rent for.
I am planning to change my job this year. Can I share my old rent receipts with the new company?
In case your current employer allows HRA exemption from a previous job’s income, you might have to submit your old rent receipts. It is necessary to reveal the salary from your previous employment to your current employer in Form 12B.
Conclusion-
House rent receipt India is an important proof of payment for the tenant that is useful in tax deduction benefits and preventing any disputes with the landlord. It can also help to claim HRA to get a rebate on your Income Tax. A person who is renting a house must get this rent slip from the tenant to avail of its all benefits.
