PAN Card for HRA Exemption

For claiming HRA, one needs to give details regarding PAN Card information. There was a circular laid down by the Income Tax Department of India, where if the annual rent paid is more than a lakh per annum, in that case, it is mandatory to provide PAN Card copy of Landlord to the authority for claiming exemption. It is of utmost essential to provide PAN Card details for getting HRA exemption for all the income-earning individuals.

About House Rent Allowance

HRA is known as House Rent Allowance Commodity. It is that part of the salary of an employee received from the employer for rented accommodation. Exemption on rent can only be given if an employee is residing in a rented apartment. Subjected to a certain condition, part of HRA is being exempted under Section 10(13A) of the Income Tax Act 1961. One must keep in mind that HRA received from an employer is taxable. An employee who is working in a private organization then also allowed to have HRA of 50% of the basic salary in metro cities and for non- metro cities, it is 40%. All employees who were working in a public sector organization will get an exemption based HRA on minimum and maximum HRA in different cities as per the recommendations of the 7th pay HRA exemption for all the income-earning individuals.

Who can avail of house rent allowance?

Tax benefit privilege given only to salaried employees. It is for those salaried employees who are getting HRA as a part of their salary structure. To avail of this benefit, income-earning individuals should be residing in a rented house. In that case, where an employee is getting HRA from the organization, but residing in his or her own house, then there will be no HRA exemption.

Enforcement of new HRA Law

As per the new HRA Law under Income Tax Act, 1961, all salaried employees who pay more than ₹1,00,000 rent per annum are required to provide PAN details of landlord for claiming deductions. The employee is required to submit the PAN Card Declaration from the landlord along with the tax exemption claim form. The PAN declaration form should be printed in A4 size and should include below details with the form:

  • An undertaking from the landlord stating his/her name.
  • Address of the property
  • Amount paid to the landlord as rent
  • PAN card number of Landlord
  • Landlord’s name and address
  • Landlord’s signature

Reason for the change in HRA law

The Government reduced the figure that employees are getting as HRA exemptions without even submitting the landlord’s PAN details. The reason for enactment of new law mentioned below:

1. Employees submitting the fake rent receipts for getting HRA exemption

Submitting fake receipts by employees that are higher than the amount they pay as rent. Many cases have been reported where employees are submitting fake rent receipts to claim HRA exemption. The figure of HRA exemptions increases with the employee salary. Certain employees are not paying rent but then also trying to claim the HRA exemption to avoid paying tax on the amount.

2. Landlords not showing rental income and avoid paying tax on the same

The Government discovers that the number of individuals who gives their property on lease and collect rent on the same does not pay tax. To ensure that such an individual declares rent on the same, the government made it compulsory for all renters to mention the PAN details of the landlord in the HRA exemption claim form. It is a way to find if the landlord is showing rental income at the time of filing tax returns.

How to claim HRA when living with the parents?

  • As rental income is taxable for the parents, individual need to consider the income tax slab of her or his parents  to come to a solution. The discrepancy in the same may lead to a heavy penalty or one can also get notice from the Income Tax Department of India.
  • Parents of the must be  the owner of the house. For saving tax,  an individual needs to pay the rent to the property owner. In case,  the property is jointly held,  the individual needs to show that he or she is paying rent to both the parents.
  • One needs to make sure that the rent receipt submitted for the HRA exemption should be duly signed by the parents.
  • Documentation regarding the rental agreement should be made clear.
  • Parents should also show rent received as a rental income at the time of filing rental income.

How to calculate HRA?

There are three factors on which HRA is being calculated:

  • Actual amount paid on rent minus 10% of your basic salary.
  • 50% of HRA, if the employee is residing in metro cities and 40% for non- metro cities.

Required documents to get HRA exemption

  • Preceding months’ rent receipt
  • Rent agreement with the owner of the house
  • If the rent exceeds is exceeding Rs.1,00,000 annually the employee should obtain a copy of the landlord’s PAN and submit it to his/her employer