PAN Card for HRA Exemption

To claim HRA exemption, you must have the following eligibility requirements as follows: 

1. Salaried Workers: Only workers who get HRA as part of their pay package are eligible to claim the House Rent Allowance Exemption 

1. Old Regime: Only employees who choose the old regime are eligible to claim the HRA exemption. Under the new regime, this exception is no longer available 

1. Rental Housing: The taxpayer ought to reside in a rental home. HRA cannot be claimed by assesses who reside in their own home. 

Documents Required to Claim HRA Deduction 

To claim HRA deduction, you must submit the following documents as follows: 

1. Rent receipts with the proper stamp 

1. The current fiscal year's rent agreement 

1. The employee must give their employer a copy of the landlord's PAN if the rent exceeds ₹1 lakh per year. 

Change in Tax Laws - PAN Card of Landlord for HRA Exemption

According to an earlier notification, the landlord’s PAN Card details were to be mentioned in the form when filing a tax exemption for HRA if the annual figure was above ₹1.8 lakh. 

However, in 2013, the government released a new circular stating that PAN details had to be mentioned for HRS exemptions for amounts above ₹1 lakh.

Fake PAN Card for HRA Exemption

In addition to being illegal, trying to obtain an HRA exemption by using a fake PAN Card is against the law. Strict procedures are in place to ensure that PAN information submitted during tax filings is authentic. People who are detected using fraudulent PAN Cards could be subject to serious penalties and legal consequences. To prevent any issues, it is usually advisable to follow the law and give accurate PAN information. 

Landlords Not Paying Tax on Rental Income

The government has found that a number of individuals who lease properties and collect rent do not pay tax or declare this income in their tax return. To ensure that individuals declare this income, the government has made it mandatory for renters to include the PAN details of the landlord in exemption claim form, so they can check if the landlord is declaring the rent as income when filing tax returns. 

New Law Perquisites

As per the law in force, all employees who declare HRA of above ₹1 lakh a year will be required to submit their landlord’s PAN details when claiming exemption.

The employee is required to submit a form, known as the PAN Card Declaration from Landlord along with the tax exemption claim form. The PAN Card Declaration from Landlord is to be printed on A4 size blank paper and is to include the following:

1. An undertaking from the landlord stating his/her name.
2. Confirming that the property has been given on rent to the employee.
3. Address of the property given on rent.
4. Amount the employee is paying as rent.
5. The landlord’s PAN Card number.
6. The landlord’s name and address.
7. Landlord’s signature.

Penalty for Non-Submission of Documents

If the employee claims HRA for amounts above₹1 lakh without submitting the required documents and declaration, the employee will not receive the tax exemption. The HRA amount will be clubbed with the employee’s salary and taxed according to relevant tax slab.

Tax Deductions on House Rent Allowance (HRA)

The House Rent Allowance (HRA) is given by an employer to his/her employees to meet rental expenses. The HRA is taxed under the head 'Income from Salaries'. The HRA is designed to give the employee tax benefits for meeting accommodation expenses. The HRA is given only to salaried employees, self-employed individuals may not claim for HRA.

The HRA is regulated by Section 10(13A) of the Income Tax Act. A part of the HRA is exempt from taxes through provisions in Section 10(13A). The taxable income of the individual is determined by deducting the HRA exemption from the total income of the individual. The HRA is fully taxable if the employee is not staying in a rented accommodation.

Employees Paying Rent But Not Receiving HRA (Section 80GG)

Some employees do not receive HRA and self-employed individuals may not claim for a tax deduction on HRA. Section 80(GG) of the Income Tax Act allows for deductions under these conditions.

Amount of Exemption

Section 80(GG) allows for the least of the following to be exempt from tax:

1. Rent paid over 10% of the total income of the employee
2. 25% of the total income
3. Rs.5,000 per month

The total income for deductions under Section 80(GG) is calculated by deducting the long term capital gains, the short term capital for which the Securities Transaction Tax (STT) has been paid and deductions under Section 8(C) and 80(U) from the gross total income of the individual.

Criteria

1. The individual, the spouse of the individual, the minor child or the Hindu Undivided Family (HUF) should not own any accommodation where the assessee resides.
2. If the individual or the HUF owns any property from which rent is collected, they are not eligible for deductions.

An individual who is claiming for deductions on interest of home loan or principal amount of home loan paid or HRA may not claim for deductions under Section 80(GG).

Effects of Neglecting Rent Receipts

If you fail to provide your employer with rent receipts, you can face the following problems: 

1. No HRA exemption: Your employer will withhold more TDS from your pay and consider the entire House Rent Allowance as taxable 

1. Increased tax liability: Your taxable income rises because of the inability to claim exemption, which raises the amount of tax due 

1. Scrutiny risk: The Income Tax Department may contest your claim during assessment if you make an HRA claim directly on your ITR without providing any supporting documentation 

1. Refund loss: You will have to file an ITR and wait for a refund if excessive TDS is deducted because of non-submission, which will delay cash flow.

How to Claim HRA When Living with Parents?

The following are the points that should be considered while claiming HRA when living with parents:

1. Rented accommodation should be availed by the individual
2. The house should be owned by the parent of the individual

1. Rent should be paid by the individual to the owner of the property and to both parents in case property is owned jointly
2. Clear documentation should be done while preparing the rent agreement
3. To avoid discrepancies while filing tax returns, obtain dully signed rent receipt from your parents 
4. While filing tax returns, parents must show the receival of rental incomes as it is taxable

How is HRA Calculated?

HRA is calculated considering the lowest of the following three conditions: 

1. Difference between actual rent paid and 10% of the basic salary 

1. The amount received by the employer as HRA 
2. If the employee resides in metro or non-metro cities, then HRA would be 50% or 40%, respectively

Here is How HRA calculated:

Mr. A receives basic salary ₹40,000 every month and resides in Delhi (metro city)

Rent paid every month is ₹10,000

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