To demand an HRA i.e., House rent allowance, it is mandatory to give proof of the amount of the rent to the owner, these rent receipts serve as a piece of evidence. The owner or the employer can grant reductions and allowances only after confirming the same. The house rent allowance is dependent on the receipts and shall be estimated, respectively.
What are rent receipts?
A rent receipt is evidence of a deal of rent funded by a resident to his/her landowner. A rent receipt is given by the proprietor upon collecting the rent from the tenant with his/her signs marked on it. If an individual gets a rent receipt, he/she should keep them along with important documents as the receipt is an important document too. Rent receipts can be accepted for lawful matters or tax compensations if you are qualified.
Your company would necessitate this legal proof each business year, to determine your tax accountability and insist deductions on your part if HRA is a portion in your salary calculations. Your company will ask you to present the rent receipts before the end of the economic year. Even if one is paying rent by a credit card or through different money transfer platforms, one needs to secure rent receipts from one’s proprietor and present the same to one’s organization, to demand HRA reductions.
The resident will have to give the rent receipts to his company to demand HRA privilege if he gives a rent of Rs 3,000 every month. In the matter of cheaper monthly rent, people must not give the receipts. It is also appropriate to discuss here that you do not have to provide the rent agreement, for receiving all the HRA benefits, as the law for HRA does not say that exactly. But, the tenure will not be adequate, till a rent agreement has been approved and completed between the landowner and the resident.
What are the elements in the rent receipt?
The transaction of rent occurs within the tenant/resident & landlord or the owner of the house on a specific date every month for proof of having an address and rent of a particular value for a month.
For every rent receipt to be original or valid, the following elements must be in a rent receipt template:
- Tenant Name
- Landlord/Owner Name
- Amount of Rent Payment
- Date of Rent Payment
- Rental Period (Time)
- House Address (Rented Home)
- Sign of Proprietor or Manager
Other components of a valid rent receipt:
- PAN card of the Owner/Landlord (not compulsory, provide only if the annual rent is more than Rs.1,00,000 in a year)
- Revenue Stamp (only at the times when amount surpassing Rs. 5000 is given in cash)
- Mode of payment (for eg: cash, credit card, cashier’s check)
- Services or other charges involved in the amount (e.g., utilities, convenience fees, security deposits)
What is the actual benefit of Rent Receipts?
Many organizations provide House Rent Allowance (HRA) to workers for convening the cost of living in leased accommodation. House Rent Allowance (HRA) is one of the largest tax-saving ways as the entire amount of House Rent Allowance is not taxable. Thus, rent receipts save you from a certain percentage of tax on House Rent.
The three conditions given below are tax-exempt:
- Actual House Rent Allowance (HRA) received
- Rent spent less than 10% of Wage.
- 40% of Salary (50% of Salary in metro cities like Mumbai, Delhi, Kolkata, and Chennai)
To give you the advantage of HRA, the HR administration requires you to confirm whether you have given rent for deducting HRA tax.
Steps to generate free rent receipts online
Utilizing online rent receipt generators on different platforms, residents can produce online receipts for free of costs by following these easy steps:
Step 1: Go to the platform that provides receipts. Click on the tab that says housing online rent receipt generator. The first page that emerges will claim you to give the resident’s name and the rent expense. Click on the ‘continue button to move forward.
Step 2: Now give the owner’s name, the full address of the leased property, and the owner’s PAN card details (optional). Click on the ‘Continue’ button to move forward.
Step 3: Fill in the time for which the rent receipts must be produced. Click on the ‘Continue’ button to move forward.
Step 4: The following page will provide you a view of the rent receipt. After assuring that every detail in the preview is accurate, you can click on the ‘print’ button to get prints of the receipts on the last screen. Also, you can download the PDF of the rent receipt.
What is HRA (House Rent Allowance)?
House Rent Allowance or HRA is a pay element compensated to workers by an organization towards the settlement cost of residing in that city. Even though it is a bit of your pay, unlike your primary pay, HRA isn’t fully taxable, a percentage of House Rent Allowance is spared under Section 10 (13A) of the IT Act.
Companies decide the House Rent Allowance amount to be given depending on measures like the salary arrangement, payroll amount, and city of habitation. You can review this with your company to guarantee that you preserve the maximum tax deducted as per the Income Tax Act.
Who can claim HRA?
You can demand reductions if you dwell in borrowed accommodation and HRA is a portion of your payroll. People residing in rented settlements can avail of HRA exemptions to save tax under Section 10 (13A) in the case of salaried selves. Self-employed experts are also given HRA tax reduction under Section 80GG of the act.
Document required to claim HRA:
To demand HRA, you are expected to present relevant papers like rent receipts, rent agreements to your organization before the completion of the economic year. If the cost of rent is more than Rs. 1 lakh per annum the PAN card of the owner is also required. This will support you to get privilege in your form-16 and you can avoid troubles during your ITR filing.
Important things to note about the rent receipts:
- A revenue stamp is obliged to be joined on rent receipts if a bill payment is higher than Rs. 5000. If rent is given by cheque, then a revenue stamp is not needed.
- The rent receipts for all the time that you are demanding HRA are expected to be presented.
- If the yearly rent paid surpasses Rs.1,00,000/- it is compulsory to submit the PAN card of the proprietor to demand HRA deduction. If the landowner denies providing his PAN card, then you will not be able to claim HRA for the rent given in a surplus of Rs. 1,00,000/- and your company will decrease the TDS respectively.
What if my organization does not give me House Rent Allowance (HRA)?
If you pay an amount for any living settlement held by you but do not get HRA from your organization, you can however demand the deduction under Section 80GG. Requirements that need to be satisfied to demand this deduction:
- You should be self-employed or salaried person.
- You have not taken HRA at any point throughout the year for which you are demanding 80GG.
- You or your wife/husband or your minor child of which you are a brother do not possess any living comfort at the place where you presently live, complete duties of office, or profession or conduct on business or service.
In the event you own any private property at any site other than the area specified above, then you should not demand the advantage of that estate as self-occupied. The other assets would be considered, to be let out in line to petition the 80GG deduction.
House rent receipt and House Rent Allowance (HRA) benefits: Key points to consider.
- In spousal circumstances where both husband and wife get individual receipts for rental payments from the proprietor. HRA can be demanded by both independently, but caution should be practiced to avoid any duplication or disparities.
- Self-employed people can also demand advantages for their rental fee that comes under section 80 GG.
- In situations where organizations forget to attach HRA in your Form 16, workers can get returns on many tax deductions by demanding the same at the time of ITR filing.
- Employees without the House rent allowance component as a portion of their payment cannot demand the advantages of HRA but can ask for deduction in section 80GG of the Income Tax Act.
- Owners with home loans and House rent allowance, as a portion of their salary, can demand deductions both under House rent allowance and home loan advantages facing interest debt and capital repayment.
- You cannot be the owner or co-owner, of the home for which you are spending rent and demanding HRA. Therefore, those residing in the houses of their folks are permitted to demand HRA advantages if they are giving rent and the likewise is revealed in their wages outgoing.
- To determine the amount of the exemption that one can ask for, your wages will only be counted for the time for which you have given the rent. Any HRA tax benefit cannot be demanded if the rent given does not surpass 10% of the wages for the appropriate period.
- Presenting rent receipts for every month is not compulsory. It could be arranged periodically, half-yearly, or yearly basis. But the receipts must be presented to the organization for the complete period for which you are demanding HRA.
- Soft prints of the rent receipts are also taken by some companies, others may request actual receipts.
- Any incorrect data in the rent receipt would sum up to become null, empty, and void.
- If in any situation you are sharing the home with other tenants who are also undergoing the rental mortgages, the HRA reduction for you would be granted only to the amount of your part in the rent and not for the complete amount.
FAQs
1. Is rent receipt compulsory for claiming House Rent Allowance?
If a worker gets House Rent Allowance (HRA) more than Rs. 3000/- per month, it is compulsory to present rent receipt to the organization/employer as a piece of evidence for demanding HRA.
If your House Rent Allowance is lesser than Rs. 3000 per month, store rent receipts with you if the Income Tax Officer questions them in the future.
2.What is a House Rent Allowance and how to estimate HRA?
HRA stands for House rent allowance. It indicates the part of salary got towards the rent mortgage and is acknowledged as a deduction from taxable salary below section 10-13A. HRA exclusion is permitted of the following:
The exact HRA acquired by the employee.
The exact rent was less than 10% of the salary.
3.How much of my House Rent Allowance is excluded from tax?
The percentage given below will be permitted as a deduction from your taxable earnings.
50% of the primary wage if you reside in a metro city.
40% of the primary wage if you reside in a non-metro city.
4.How to Claim HRA When Living with Parents?
Let us understand this with an illustration. A girl works in an organization in Bangalore. Though her corporation gives her HRA, she resides with her parents in their home and not in leased accommodation. How can she execute the use of this HRA? She can give rent to her parents and demand the HRA granted. All she has to do is start into a rental contract with her parent and give money to them each month. This way she can execute a nice indication of her parents while preserving taxes. Her parents will have to explicate the rent she gave on their ITR. However, they can save a lot of money as a family.
5.How to Claim Deduction Under Section 80GG?
- Rs 5,000 per month.
- 25% of standardized total income.
- Original Rent less than 10% of modified total income.
Modified Total Income proposes Total Income Less long-term capital gain, short-term capital gain below section 111A as well as Income under section 115A or 115D and deductions 80C to 80U.
