Income Tax News: Companies will soon begin requesting investment and expenditure documentation from employees in order to save on salary taxes. The House Rent Allowance (HRA) option allows those who live on rent to claim a tax exemption. if provided as a part of the salary by the employer. However, the question of whether the rent agreement and rent receipt are required as evidence to support a claim arises.
Crucial Role of Rent Agreement
Experts say that while the rent agreement is crucial, it might not be enough on its own to qualify for the HRA tax exemption. Rent receipts are evidence that the worker has, in fact, paid the rent specified in the rental agreement. As a result, it is advised that an employee keep their rent receipts and rent agreement and present them to the assessing officer upon request.
Importance of Documenting Tax Deductions
When filing an income tax return, it is crucial to have documentation of any claimed tax deductions or exemptions (ITR). This is because the person could be asked to provide documentation for the claims made in the ITR by the Income Tax Department. Upon processing the ITR, the Income Tax Department may request documentary evidence. The Assessing Officer is empowered to gather data and confirm the accuracy of the claims made by taxpayers in their Individual Tax Returns (ITRs). They are able to ask questions or obtain the required paperwork for this.
HRA Exemption for Rented Homes
Provided that the employee lives in a rented home and actually pays rent for that residential property, he will be exempt from HRA. The rent receipt certifies that the landlord has received the rent payment. As a result, you should get the rent receipt from the landlord. even in the event that the fare is paid electronically.
Essential Documentation for Rent Payment
As tax professionals point out, in order to present official proof of rent paid, one needs a rent agreement and rent receipts. The rent receipt needs to include the landlord’s name. Name of landlord, amount paid, including any applicable TDS withheld, and method of payment (cash or electronic). Include a revenue stamp if the monthly rent payment in cash exceeds Rs 5,000.
Claiming HRA Tax Exemption
If an employee receives HRA from their employer, they are entitled to a tax exemption on HRA. reside in a rented flat and have made rent payments throughout the fiscal year. By providing the employer with evidence of their rent payment and obtaining the tax exemption on Form 16 that the employer issues, they can claim the HRA tax exemption.
As an alternative, HRA tax exemption can be claimed in the ITR when filing it if the employer has not received the proof. Here, you don’t have to provide the Income Tax Department with any supporting documentation if they approve your claim. Nevertheless, documentation of the claimed exemption must be presented if the Assessing Officer expresses uncertainty.
Meeting Employer’s Proof Submission Deadline
If your employer specifies a deadline for submitting the proof, you must meet it in order to prevent having more tax withheld from your income at the source (TDS). assuming you chose to use the previous tax structure. If the total amount of rent paid in a financial year exceeds Rs 1 lakh, employees are required to furnish the landlord employer with their PAN or Aadhaar. The renter is required to deduct TDS from the rent if the monthly rent exceeds Rs 50,000.
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