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My landlord is not providing PAN, How to claim HRA exemption?

Taxation in India

My landlord is not providing PAN, How to claim HRA exemption?

 

Numerous employed individuals who relocate to different cities for work purposes and become tenants can potentially qualify for a tax exemption on their rental expenses as per the Income Tax Act. However, there are certain conditions that need to be fulfilled. Occasionally, when applying for House Rent Allowance (HRA), the landlord may not possess a PAN (Permanent Account Number) or may refuse to provide it. Does the absence of a landlord’s PAN card affect the eligibility to claim HRA?

 

To be eligible for HRA, you must receive it from your employer as part of your salary. Additionally, the accommodation you reside in should be rented, not owned by you. The calculation of the HRA exemption depends on three factors:

 

1) The actual amount received as HRA.

2) 50% of the Basic Salary+DA in metropolitan cities or 40% of Basic Salary+DA in non-metropolitan cities.

3) The amount obtained after deducting 10% of the Basic Salary+DA from the actual rent paid.

 

The tax exemption is granted on the lowest amount among these three. The HRA amount is deducted from the income earned from your salary, resulting in tax savings.

 

To claim tax exemption on HRA, you need to provide the rent receipt and rental agreement to your employer. If the annual rent exceeds Rs 1 lakh (equivalent to Rs 8,333 per month), the Central Board of Direct Taxes mandates that the landlord’s PAN number be provided. However, even if the landlord does not possess a PAN, you can still claim HRA.

 

In such a situation, the employee has two options. First, they must submit a declaration to their employer, acting on behalf of the landlord. The declaration should include the landlord’s name, age, and other relevant details, along with a declaration from the landlord stating that they do not possess a PAN card. The employer can then accept this declaration.

 

There is a possibility that the company may not accept the declaration. In such cases, the employee can claim HRA while filing their Income Tax Return (ITR). However, this may lead to a scrutiny notice from the Income Tax Department due to discrepancies between the income reported by the company in Form-26AS and the income declared in the ITR by the employee. To address this, the employee must possess the rent receipt, rent agreement, and the landlord’s declaration.

 

Rent agreement and rent receipt are essential for claiming HRA. A proper rent agreement and payment through official banking channels will facilitate the employee in claiming HRA. Furthermore, the rental income will be reflected in the Annual Information Statement (AIS) of the landlord, thereby obligating them to pay taxes. Failure to do so may be considered tax evasion.

 

If you intend to claim HRA, remember a few crucial points. Always possess a valid rent agreement and obtain a rent receipt from the landlord each month. Opt for rent payments through cheques or online methods instead of cash. If the annual rent exceeds one lakh, apart from the rent receipt, engage in a discussion with the landlord regarding PAN or a declaration. It is essential to only claim HRA for the actual amount paid as rent, as claiming excessive tax exemption may invite scrutiny from tax authorities.

 

Disclaimer: This tax consultancy article is for educational purposes only. It does not constitute personalized tax advice. For specific tax situations, consult a qualified tax professional or contact Qualified Munim Team at qualifiedmunim@gmail.com or +91-74199-00446. Visit www.qualifiedmunim.com. We are not liable for any actions taken based on this information.

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