Rent receipt: Why is it needed for HRA exemption?

It is mandatory to provide the hire receipt to the business enterprise, if the worker desires to declare HRA for condo accommodation

Rent receipts are evidence of transactions that occurred among the landlord and the tenant. There have been cases in which tenants were denied HRA exemption, on the ground that there was no lease receipt to be had to substantiate the condo transaction. Salaried folks who live in a rented assets are allowed to reduce their tax legal responsibility by claiming tax deductions to the quantity of eligible hire charge as HRA. The House Rent Allowance (HRA) gain is available simplest if you live in a rented domestic. Let us first recognize how HRA is calculated.

HRA calculation
A salaried individual can claim HRA deduction (below the old tax regime) to the volume of the least of the subsequent:

HRA really allowed by the enterprise.
For someone residing in a metro town: 50% of Basic Salary + DA (Dearness Allowance)
For someone living in a non-metro town: 40% of Basic Salary + DA
Annual lease fee over and above 10% of annual profits + DA
Self-hired individuals and non-salaried personnel aren't allowed to say the HRA benefit.

Why is a hire receipt critical for claiming the HRA advantage?
It is mandatory to offer the lease receipt to the business enterprise, if the employee desires to declare HRA for apartment accommodation with a lease charge of greater than Rs three,000 in keeping with month. If the rent price exceeds Rs 1 lakh in a yr, it's miles obligatory to provide the PAN details of the landlord to the company.

In some instances, landlords won't have a PAN card. In such cases, the employee should take an venture from the owner and get Form 60 stuffed and signed by way of the landlord. The task and Form 60 need to be submitted to the corporation. In some cases, the employee will pay a higher lease than noted inside the lease receipt at the same time as paying the extra quantity separately to the owner. In such instances, the agency will calculate the HRA based totally on the quantity stated within the hire receipt even as ignoring the excess amount. So, the rent receipt is the critical document, primarily based on which the organisation determines the eligible HRA gain of the employee.

There are a few cases in which the man or woman lives with their mother and father and can pay the lease to them. In such cases, it is very critical to get the hire receipt from the parents, along side a lease agreement and the rent receipt for the apartment transaction must be furnished to the corporation. Parents need to show the apartment income of their ITR and the condominium transaction should suit with the worker’s report.

The lease receipt is likewise critical, when the employee owns a domestic however lives in a specific city. In this type of state of affairs, the employee can get the HRA advantage with the assist of lease receipt and additionally claim the tax deduction gain in opposition to hobby and most important charge on the home loan.

Important factors to maintain in mind earlier than you claim HRA advantage
As already referred to, HRA may be claimed handiest if you stay in a rented home and a condo transaction has taken vicinity with the supply of right apartment receipts. Fulfilment of the subsequent situations are essential for claiming the HRA gain:

The employee, his/her partner or minor baby, or within the ability of HUF, must not very own an lodging.
If a person owns a assets and earns rent from such belongings, then HRA deduction can't be claimed.
The receipt need to encompass the components along with the tenant’s call, landlord’s call, assets cope with, rent amount, lease period, date of fee, mode of fee, PAN range of the owner if the once a year hire quantity exceeds Rs 1 lakh, sales stamp if the rent is paid in coins which quantities to extra than Rs five,000 and signature of the landlord.