HRA exemption: Claiming House Rent Allowance tax profit? Keep these 5 important documents handy in case income tax department asks | Business


HRA tax exemption: Many staff have the availability for House Rent Allowance (HRA) as part of their wage construction. To decrease their tax burden, many declare HRA exemption in the event that they reside in rented lodging. Recently, the Income Tax Department found HRA fraud involving unlawful use of Permanent Account Numbers (PAN). They discovered 1000’s of high-value instances, some exceeding Rs 10 lakh.
As a consequence, there may very well be extra scrutiny of HRA claims, notably for bigger quantities.Generally, the income tax department can revisit outdated tax returns filed as much as 4 years in the past. Taxpayers ought to retain data of their claimed deductions and exemptions throughout this era.
According to ET, it is important to maintain particular proofs available to make sure that the tax department accepts your professional HRA tax exemption when submitting your income tax return (ITR). Below is a listing of documents to maintain handy and actions to take to keep away from rejection of your HRA tax exemption.
ALSO READ | Income Tax Rules FY 2024-25: New vs outdated tax regime – 6 guidelines salaried people ought to know

Valid lease settlement

As a tenant, be sure you have a legitimate lease settlement together with your landlord. Ensure the settlement complies with income tax legal guidelines, particularly if the month-to-month lease exceeds Rs 50,000. In such instances, Tax Deducted at Source (TDS) have to be deducted from the lease. The settlement ought to specify if TDS is relevant, who will deduct it, and the strategy of deduction.
Additionally, the lease settlement ought to embrace primary particulars of each the tenant and landlord. Tax specialists suggest together with PAN and Aadhaar particulars of each events as a very good apply.

Rent receipts

In addition to a legitimate lease settlement, it is essential for people to gather lease receipts for the funds made. According to tax specialists, merely having a lease settlement may not suffice as proof for claiming HRA tax exemption. Rent receipts function proof that the tenant has certainly paid the lease quantity through the monetary 12 months. It’s important to gather these receipts even when the lease is paid electronically, corresponding to via internet banking.
Furthermore, employers might request each the lease settlement and lease receipts to deduct TDS from the wage. If both doc is lacking, the employer may deduct the next tax from the wage income. Therefore, it is important to keep up each documents to keep away from any discrepancies.
ALSO READ | New income tax return kinds ITR-1, ITR-2, ITR-4 accessible for FY 2023-24; know particulars AY 2024-25 e-filing

Rent cost by digital cost channels

Chartered accountants suggest paying lease via digital channels like Net banking or UPI fairly than money. Electronic funds create a transaction document, which might function proof if the income tax department requests it. Income tax laws restrict money funds of Rs 2 lakh or extra underneath Section 269ST of the Income-tax Act, 1961. Tax specialists warning that money funds exceeding this restrict might incur penalties underneath Section 271DA.

Landlord’s PAN

If you are in search of HRA tax exemption out of your employer and the lease paid exceeds Rs 1 lakh in a monetary 12 months, you could present your landlord’s PAN. However, should you select to assert the HRA tax exemption whereas submitting your ITR as a substitute, the owner’s PAN will not be required by the income tax department. (*5*), it is advisable to retain a replica of the owner’s PAN in case it is requested by the tax department in the long run.

Rent to members of the family

Income tax legal guidelines don’t prohibit paying lease to members of the family. However, it is advisable to keep up essential documents even when renting from members of the family to keep away from rejection of HRA tax exemption by the income tax department. Additionally, people ought to request members of the family to declare the lease acquired as income in their tax return, particularly if ITR submitting is obligatory.

Nilesh Desai
Nilesh Desai
The Hindu Patrika is founded in 2016 by Mr. Nilesh Desai. This website is providing news and information mainly related to Hinduism. We appreciate if you send News, information or suggestion.


Please enter your comment!
Please enter your name here

Share post:



More like this