If you are a salaried employee, you are eligible to avail of many tax benefits and reduce your overall annual tax liability. One such tax exemption you can claim is the HRA (Housing Rent Allowance) benefits. According to the Government of India notification, if your annual housing rent payment exceeds Rs. 1 lakh, you can claim a deduction on it. However, to claim the exemption, you must compulsorily submit the PAN card information of your landlord.
Before we delve deeper into how to claim HRA tax benefits, let us first understand what HRA is.
HRA, or Housing Rent Allowance, is an integral part of the employee’s salary. It is a subset offered to salaried employees to cover accommodation cost up to a specific percentage. As an employee, since you would be spending this amount for accommodation purposes, the government does not expect you to pay taxes on it and allow you to get a tax exemption on HRA.
As per the current tax laws, you can claim HRA exemption on the following amount:
• The actual HRA received
• Balance of rent paid over 10% of your total salary
• Up to 50% of the salary if you reside in metropolitan cities like Mumbai, Chennai, Delhi or Kolkata. If you reside in any other Indian city, you can claim up to 40%.
Many salaried employees fail to get the exemption because their landlord does not have a PAN card or they refuse to share their PAN details with the tenants. If you face a similar situation and fail to get PAN details from your landlord, as per the tax laws, you can still file the income tax return and claim the exemption.
However, in doing so, you may get a notice or intimation from the income tax department because of the mismatch between the salary income as per For, 26AS (issued by the employer) and the amount shown in your ITR (Income Tax Returns) application. So, you must be prepared to provide evidence of the rent payment and underpin your exemption claim.
You must keep all the documentary evidence ready, like the rent agreement, rent receipts received from the landlord, and the bank statement reflecting the rent payment to the landlord for claiming the HRA exemption.
Why did the government of India introduce a law for employees to provide landlord PAN details to claim HRA exemption?
The government of India introduced this law in 2013 mainly because many employees were found guilty of submitting fake rent receipts to claim HRA exemptions. Also, many employees who do not pay rent attempted to claim HRA exemptions and reduce their taxable income. So, by introducing a law to include the landlord’s PAN details in the ITR application for claiming HRA exemption, the government wanted to check if the employee is actually paying the rent amount for which they are claiming an exemption for.
What happens if you fail to submit the necessary documents for claiming HRA exemption?
If you pay housing rent of more than Rs. 1 lakh without submitting the necessary documents, proof or declaration from the landlord, you will not be able to claim the tax exemption on HRA. Also, the amount will be added to your income and will be taxed as per the relevant tax slab.
Final Word
Now that you know everything about claiming HRA tax benefits without having the landlord’s PAN details, make sure that you take advantage of the benefits guaranteed to you under the tax laws. You can use the income tax calculator to compute your annual tax liabilities accurately.
