Rent Receipt for Income Tax

For effective and efficient filing of income tax, salaried professionals residing in rented accommodations are required to pay a certain House Rent Allowance or HRA. To be able to file this HRA, one needs to fill up the rent receipts accurately.

Hassle-Free & Free of Cost Generation of House Rent Receipts

We all dread those long hours and incessant amount of efforts that go into generating house rent receipts at the end of a financial year. Most salaried professionals are expected to pay HRA as a tax and generating one now has become relatively easier than before. Generating house rent receipts might seem like a challenge in the start, but when handled efficiently, it yields great results.

House Rent Receipt Format
House Rent Receipt Format

Claim HRA Tax Benefits

Any salaried individual is eligible to pay HRA if they are earning a certain amount of money. You can save a huge chunk of your taxes by claiming HRA exemption. The HRA is generally directly linked with your account and with time, as your income rises, so does your HRA. You will be eligible to claim HRA only if you are living in a rented accommodation and are paying rent. Additionally, your employer is legally responsible to offer HRA as a part of your salary since it is beneficial to the employee without adding on to the cost of the employer.

Virtues of HRA

If you are a salaried individual living in a rented house, HRA is without a doubt one of the most effective tax saving tools you will have. Even though the process of an HRA tax exemption is slightly more complicated, it offers huge benefits and is considered a go-to option for many salaried professionals. Determination of HRA tax exemption essentially depends on 3 factors:

  • Amount provided by the employer as HRA
  • The actual rent that the employer is paying
  • The basic salary of the employee

Furthermore, the HRA amount that is ultimately eligible for tax exemption is expected to be calculated as least of the following values:

  • Verified HRA received by employee - The limit of tax-exemption is capped by the actual HRA that is received.
  • Payable Rent - This includes 10% of your basic salary, which means exemption is only made over 10% of the basic pay that you are obtaining.

How to Ensure HRA is not Rejected

Section 10(13A) of the Income Tax Act clearly states that individuals can claim HRA as their tax deduction thereby helping them lower their complete taxable income.

Individuals who have taken a home loan and are subsequently paying EMIs on the same are qualified to claim HRA. Additionally, if your company is not providing HRA, despite you being a salaried professional, you can conveniently claim this deduction under Section 80GG.

Individuals staying in houses and properties that are owned by their parents are also eligible to claim HRA by providing rent payment proofs. However, in this regard, the parents receiving this amount must ensure to declare this amount as a rental income, when filing tax returns. Please note that in this scenario, the rent from the children will attract tax because it will be considered an income from house property. This attribute has been taken undue advantage of by people who do not even pay rents to their parents.

However, things are set to change and there is a set of new regulations and rules that individuals are supposed to consider strictly before claiming HRA :

  • Mention rent, tenure, utility bills etc when submitting the rent agreement, even if the rent goes out to parents or spouse.
  • The number of tenants sharing the accommodation including the ratio of division of rent is a must to declare.
  • It is advisable to pay rent online or through e-banking cheques because, as per the new set of guidelines, you will be required to provide bank statements as proof.
  • You have to be physically present and living in the said accommodation if you’re claiming HRA.
  • If you are paying a rent of Rs.50,000 or more per month, you must deduct a TDS of 5%. If you fail to do this an interest of 1-1.5% will be charged along with a penalty of Rs.200.

It is also essential to remember that HRA is deduction of tax from a person’s total income and not from the taxable income. This, in turn offers much better tax savings to employees.

Vitality of Generating House Rent Receipts

If you spot any potential savings in tax, you must claim the same with pride. Tax payment is a tool provided by the Government to honest taxpayers that in turn help them meet their legitimate needs while also substantially contributing to nation building. Being a salaried income earnestly lowers the pressure that is created on one’s personal income. HRA acts as one of the most important levers to help lighten an individual’s personal income tax burden. For maximum optimization of tax liability, one must be thorough with the essentials of HRA, must be clear about how HRA is calculated and what all is required to claim the HRA tax exemption.

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