The Most Complete Guide on Rent Receipts/Slips to claim maximum HRA Tax Benefits

As a beginner in your profession or an experienced professional, you should have been consulted by your HR departments and Accounts on Recruitment Receipts. This is when you start making jugaads called with the help of your friends, relatives, coworkers or adults to get rent receipts.

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1. Why rent receipts are required?

To apply for a Rent House (HRA) grant, you are required to provide proof of rent to the employer, rent receipts serving as proof. The employer may offer deductions and benefits after the same confirmation. The HRA allocation is based on tax receipts and will be calculated accordingly.

2. So, What are rent receipts exactly?

Of course, this is not a strange question to be asked but a valid and important question. One must have an understanding of receiving the receipt psychologically and economically. A rent receipt is proof of transactional rent paid by the landlord to the landlord. A receipt is issued by the landlord when he or she receives rent from the tenant and his or her signatures are included in it. If you receive a rent receipt, you must keep the documents you care about. Rental receipts may be used for legal purposes (if any) or tax benefits if applicable.

3. What are the elements of a rent receipt?

We can understand rental receipt items with the following statement:

"Rental work takes place between the tenant and the landlord on a specific day each month so that there is an address and lease of xxx value for a period of one month."

Therefore, for each tax receipt to apply, the following mandatory items must be on the rental receipt:

  • Tenant Name (If you are the tenant, fill in your name)
  • Landlord Name
  • Amount of Payment
  • Date of Payment
  • Rental Period
  • House Address (Rented Property)
  • Signature of Landlord or Manager

Other elements that are part of rent receipts:

  • PAN of the Landlord(not mandatory, mention only if annual rent exceeds Rs.1,00,000 in a year)
  • Revenue Stamp(where amount exceeding Rs. 5000 is paid in cash)
    • Method of payment (cash, credit card, money order, cashier’s check)
    • Services or other fees included in the payment (e.g. utilities, security deposits, convenience fees)

If you are still confused about this information and would like to produce a rental receipt onlineclick to generate rent receipt

4. Some examples/formats of rent receipts being used in India:

India is a large multilingual country, transactional writing system, and different formats used by receipt book publishers, we have many formats / designs available in the market. Professionals / Staff are often confused because of these different formats available.
We present to you some of the formats we have found in India to help you understand that they are all the same and serve the same purpose.

Rent slip format:

For the convenience of our users, we provide a place to customize and download printable rental receipts (valid format) from our rental generator tool.

click to generate rent receipt

5. Now comes the question , what is the actual benefit of Rent Receipts ?

Many companies provide employees with a House Rent Allowance (HRA) to cover the cost of living in a rented area. The HRA is one of the largest ways to save taxes as the total amount of HRA can be taxable.

The least of the three amounts is tax exempt -

  • Actual HRA received
  • Rent paid less 10% of Salary
  • 40% of Salary (50% of Salary in Mumbai, Delhi, Chennai and Kolkata)

In order to provide HRA benefits, the HR department needs to verify that you have actually paid the rent by approving the HRA tax exemption.

Lease receipts serve as proof that you paid the fine and do not reflect non-tax expense.

6. Is rent receipt mandatory for claiming HRA?

  • If employee receives HRA in excess of Rs. 3000/- per month, it is mandatory to provide Rent receipt to employer as an evidence for claiming HRA.
  • Even if your HRA is less than Rs. 3000/-, try to keep rent receipts with you in case Income Tax Officer asks for them at a later date.

I am sure you will agree with me when I say that homeowners do not give rent receipts even after paying rent. So, what do we do in this situation? Simply give your rental rental receipt to your employer and ask him or her to sign it to acknowledge receipt.

7. Where to get the rent receipts from to be submitted to the HR department?

There is no set format for hiring receipts for HRA exemption. Here's a trick to finding one-

  • Search the web and choose the one you like from the options available. Like
  • Buy a rent receipt booklet from the stationery

8. Why I am required to submit rent receipts to the HR Department?

According to our State Tax Act, everyone who pays a salary is required to deduct the source tax (TDS), deposit money from the government and pay the remaining amount to the employee. During this process, if any employee makes a tax deduction for the person who is responsible for the tax, he or she must look at and deduct the expenditure and deduct the tax from the total amount.
In general, it has been observed that people bring in fake tax receipts, or do not live in a rented area. Therefore, to combat this, HR departments have begun requesting employment contracts by providing HRA benefits.

Looking at the importance of rent agreements, here are 5 things to check in your rent agreement

Smart tactics to be followed at the time of drafting rent agreements-

  • Rent agreement should be on Rs. 500 stamp or as per the stamp rate prevailing in your state .
  • It can be entered into for 11 months only.
  • For more than 12 months, the rent agreement is not entered into instead lease deed is to be preferred which needs registration.
  • Every year, the rent agreement is renewed after 11 months with the increased rent.
  • Both landlord and tenant are required to serve the notice period as stated in agreement.

9. Important things to note about the rent receipts:

  • A revenue stamp is required to be based on rent receipts if the cash payment is more than Rands. 5000 each receipt. When tax is payable by check a stamp is not available.
  • Monthly rent receipts for an HRA applicant must be submitted.
  • If the annual fee exceeds Rs.1,00,000 / - it is mandatory to report the PAN of the landowner to claim the release of the HRA. 1,00,000 / - and your employer will deduct the TDS accordingly.

10. What to do when your landlord refuses to give his PAN?

First my friends don't ask for a copy of the PAN Card, all you need is a PAN No. If possible, the landlord does not have a PAN card and take the notice to him or her and send it to your HR. Prevention is better than cure, when you rent a house talk to your landlord in advance to share PAN no.

Is it right to submit fake rent receipts at my office to claim HRA?

Submitting a fake rent receipt can put you in trouble with Tax Department. know more

11. How payment of rent helps you in saving taxes?

There can be three situations, when you are paying rent for the rented accommodation -

  • When HRA is a part of your CTC & you submit the proof of rent payment to your HR
  • When HRA is a part of your CTC & you forget to submit the proof of rent payment to your HR
  • When HRA is not a part of your CTC

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Notes :

Condition A :

Calculation of exempted HRA (Rent Paid - 1,80,000/-) :-

  • Actual HRA received - 2,50,000/-
  • Rent Paid- 10% of Basic +DA= {180000- (700000*10%)}=110000/-
  • 50% of Basic + DA ( 700000*50%)= 350000/=

A, B,C whichever is lower is to be selected as exempted HRA.

Condition B :

You can still apply for an HRA tax benefit at the time of completing the refund as the HRA is part of your CTC. The only vision loss you will have to carry is the extra TDS that will be reduced during the year.

Condition C :

If the HRA is not part of your CTC, do not be discouraged. You can still apply for a deduction for rent paid at the time of completing the refund s / s 80GG but up to Rs. Only 60,000.

12. What if I forgot to submit rent receipts at the time of declaration?

Even if you forgot to submit rent receipts, you can still apply for an HRA while applying for IT Return. All you need is Rental Receipts only.

13. How to claim HRA exemption at the time of filing the ITR?

Here is a step-by step process for claiming HRA exemption-

  • Step 1:Calculate the HRA release rate as described above. To avoid difficulty you can also use of our HRA release calculation to find out the amount of HRA released to https://www.myitronline.com/tools/hra-exemption-calculator/

  • Step2 : Subtract the amount of HRA released from the Income Chargeable under the head salary [column 6 of you Form16, Part B].

  • Step3: Enter the amount listed in Step 2 under Income From Salary / Pension. For example, your total salary from Form 16 is 8,00,000 and you have an HRA exemption of Rs. 1,20,000, So instead of showing salary amount Rs. 8,00,000 / - on ITR1 complete as 6,80,000 / -.

14. Who can claim HRA exemption ?

If you satisfy these conditions, you can claim HRA tax exemption:

  • You are a salaried employee.
  • You receive HRA as a part of your salary package/CTC.
  • You live in a rented accommodation.

15. How HRA is exempt for income tax?

Although the HRA is part of the salary, unlike the basic salary, it is not taxable at all. A portion of the HRA is exempt under Section 10 (13A) of the Tax Act, subject to certain conditions. The amount of HRA exempted is deducted from the gross salary prior to tax deduction.

16. Can I pay rent to my parents and claim HRA?

Yes, you can apply for an HRA tax exemption by paying rent to your parents. It is recommended to have a lease agreement. You will need rent receipts to claim an HRA exemption. Also, your parents need to show you the rental income from you in their tax return.

17. Can I claim HRA and home loan?

Yes, indeed. You can want both. If you live in a rented house, you have the right to claim an HRA tax exemption. At the same time, if you take out a home loan you can apply for home loan benefits. If you have bought a house with the help of a home loan and live in another rental house, you can apply for the benefit of both your taxes. But if the house you bought and the house you live in are in the same city, you should have a real reason not to live in the house that you own, to prove to the Tax Officer. The reasons may be that the house you are living in is too far away, or the commute to work is too difficult.

18. Can HRA be claimed if I own a house?

No, you cannot enjoy HRA tax benefits if you live in your own home. One cannot afford to pay rent. Therefore, no concessions are made to the HRA and every HRA received is taxed under the “Income from Salary”. But if you live in a rented area, you can apply for exemption even if you own a house (in the same city or another city).

19. Can HRA be claimed for paying rent for 2 houses?

This can only happen if you live in both houses for a certain year for a limited number of months.

20. How LTA is Calculated?

  • In the case of LTA, the employer reimburses the travel expenses of the employee taken by the employee. Anyway, any other costs such as food, purchases, accommodation and so on are not included in the exemption. Only available for two children of a person, born after October 1, 1998 including a step or adoption.
  • Travelling Twice in a block of Four years is allowed. The current block is 2014-17.
  • Mode of travel should be air, rail or any other public mode of transport.
  • Allowed for domestic travels and not for international travels.

21. Can husband pay rent to wife and claim HRA?

Usually, HRA Tax benefits are not required by paying rent to your spouse. Therefore, if you live in your spouse's home then an HRA exemption is not available to you. However, if you still want to apply for exemption, you should be prepared to file charges as the Tax Officer may have a different opinion.

22. Can HRA be claimed by both husband and wife?

Yes, why not, if both are paying taxes. Also, it would be better for the landlord to issue two separate rent receipts or to specify the amount of work each person receives on the rent receipt.

23. Can I use my electric bill as a tax deduction?

There is no tax deduction in respect of electricity bill. However, if you are in business you can file a similar claim with the cost of your business

24. What is section 10 exemption?

Sec 10 includes that revenue part of the total revenue i.e. exempt revenue. Such as agricultural income, defined interest income, divorce income etc.

25. What is HRA deduction?

The HRA or House Rent Allowance is a grant that people who earn money from their employer meet the cost of renting their house. The amount earned in part is tax exempt, for an employee living in a rented house. In the event that an employee stays in his or her home and does not pay the rent, the entire amount will be taxed.

Frequently Asked Questions

Q- Me and my family are living in two different cities and rent for both the houses are paid by me. Can I claim HRA exemption for both the house rents paid?

As per Section 10(13A) of the Income Tax Act, 1961 exemption of House Rent Allowance is available to the employee for the rent paid in respect of the property which is occupied by himself. Hence, rent paid for the house where your family is living cannot be claimed as an exemption in this case.


 

Q- How can I claim HRA deduction of previous employer which company has not mentioned in Form-16 but HRA is part of salary?

Even if employer fails to provide HRA exemption benefits of previous employer and deducted higher tax as TDS, the assessee can still avail benefit of HRA exemption at the time of filing of return and claim a refund of such excess tax deducted.


 

Q- Is it safe for me to give out multiple rent receipts to my tenant?

If you give multiple receipts, on papers with different serial numbers or on a statement that doesn't show the balance before and after the payment was received, then you're asking for trouble as it could be claimed that they gave you an extra payment and you may be asked by tax department to include that in your income.


 

Q- How can I claim HRA exemption paid in another state than the state you work in?

If you are receiving HRA in one state, being the state in which you are working, then you cannot claim the exemption for payment of rent in another state. You can only claim the rent paid in the city of employment for claim of HRA.


 

Q- What is the solution if I have submitted rent receipt without revenue stamp?

Stamp needs to be affixed on receipts if payment is made in cash more than Rs. 5000. Revenue stamp on a rent receipt makes it a legal document, it means that payment has been received by the recipient and paid by payer


 

Q- I am living in a shared flat with my friend. How can I get HRA exemptions without affecting my sharing friend with the same rent agreement?

HRA can be claimed by you and your friend in the same proportion of rent payment


 

Q- Is it right for me to submit fake rental receipts at my office, to avoid tax? Does the Indian state/central govt ever track these fake receipts?

Yes, Income tax department can track your details as Form 16 is in sync with the ITR form, which will help the Income Tax Department in electronically matching the data reported in ITR.


 

Q- Is it right to submit a rent receipt with the PAN number of another person’s name and the person don't do earning for tax benefits?

No, rent receipt should have PAN of the person who has paid the rent and not of anybody else.


 

Q- Does HRA fall under 80C category?

No, HRA should be deducted from total Taxable Salary.


 

Q- Can I claim both home loan tax benefit and HRA benefit?

Yes, You can claim both HRA exemption and home loan benefits. The fact is that you should actually be paying rent f.Both HRA and home loan benefits are governed by different sections.


 

Q- How do I claim HRA if my employer is not paying me the same?

If you are not getting the benefit of House Rent Allowance and you have not claimed any of expense for rent paid under any other section of the income tax act, then you can claim a deduction under Section 80GG.


 

CEO Krishna Gopal

Krishna Gopal Varshney is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Myitronline.com. Myitronline is amongst the top emerging startups of Asia and authorized ERI by the Income Tax Department. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. ”

Krishna Gopal Varshney
Co-founder & CEO