This guide explains the connection between your landlord's PAN and HRA exemption and outlines the required documents for a hassle-free claim process.
As a salaried individual in India, claiming the House Rent Allowance (HRA) exemption can significantly reduce your taxable income. However, there are certain conditions you must meet for the exemption to be valid, one of which is providing your landlord's PAN details.
Many tenants are unaware of this requirement, and failing to provide accurate information can lead to complications or even the denial of your HRA exemption. In this blog, we'll explain why your landlord's PAN is crucial for the process, how to handle this requirement, and the legal aspects behind it. Understanding this aspect of tax laws will ensure your HRA claims are smooth and hassle-free.
What is House Rent Allowance (HRA)?
House Rent Allowance is a component of an employee's salary that an employer provides to help them cover the cost of renting a home. It is applicable to salaried individuals who live in rented accommodation, whether it’s a house or an apartment.
The HRA is regulated by Section 10(13A) of the Income Tax Act. It offers partial or full tax exemption based on specific conditions, such as the rent paid, the salary of the individual, and the location of the rented property.
Remember, this does not apply to self-employed individuals.
The amount of HRA exempted from tax is calculated based on the lowest of the following three factors:
Actual HRA received.
The amount of rent paid minus 10% of the salary.
50% of the salary if living in a metro city (Delhi, Mumbai, Kolkata, Chennai), and 40% of the salary is for living in a non-metro city.
To claim the HRA exemption, individuals must submit rent receipts and, in some cases, provide the landlord's PAN details. Let's take a closer look at when the landlord's PAN is required.
Why the Landlord's PAN is Crucial for HRA Exemption
To claim House Rent Allowance exemptions, salaried individuals must provide their landlord's PAN details. Initially, this rule applied if the annual rent exceeded ₹1.8 lakh. However, in 2013, the threshold was lowered to ₹1 lakh.
Reasons for the Change in Law
Here are the key reasons behind the change in the threshold:
Many employees submitted fake rent receipts, some without paying any rent, to reduce their taxable income.
Some inflated the rent amounts on receipts to claim higher exemptions.
Some landlords were not paying tax on rental income, leading to tax evasion.
These practices not only resulted in revenue losses for the government but also created unfair advantages for certain taxpayers.
Including the landlord's PAN allows the government to cross-check rental income with the landlord’s tax returns. This ensures that rental income is reported correctly and helps reduce revenue losses caused by fraudulent claims. For both tenants and landlords, this step adds an additional layer of accountability.
By requiring the landlord's PAN details, the law aims to eliminate fraud, ensure fair tax practices, and promote transparency in rental agreements.
Key Takeaways
The landlord's PAN helps ensure transparency in rental transactions.
It allows the government to verify that the declared rental income matches the tax returns.
It promotes fair tax compliance by preventing fraudulent claims and tracking discrepancies.
Documents Required for Claiming HRA
There are specific documents required to claim the HRA deduction as per the law. These include:
Rent Agreement: A valid rent agreement signed by both the tenant and the landlord to confirm the rental arrangement.
Rent Receipts: Receipts from the landlord acknowledging the rent paid, including details like the rental amount, period, and landlord's signature.
Landlord’s PAN (if rent exceeds ₹1 lakh annually): If the annual rent exceeds ₹1 lakh, the tenant must provide a copy of the landlord’s PAN details along with their claim for HRA exemption.
By ensuring these documents are submitted, employees can properly claim the HRA exemption in compliance with the law.
What to Do If Your Landlord Doesn’t Have a PAN Card?
If your landlord doesn’t have a PAN card, they must be willing to provide a declaration. It’s always best to clarify this before you rent the property. This will save you from potential hassles later, especially when you're filing taxes.
This declaration should be printed on A4-sized paper and include the following details:
Name and address of the landlord
The landlord’s PAN card number
Rent amount paid
Duration of the lease or rental agreement
A statement confirming that the rent is being paid and that the landlord’s PAN is valid
A confirmation that the property has been given on rent to the employee
Signature of the landlord (or their authorised representative)
Here’s a sample declaration for when the landlord doesn’t have a PAN card:
I, ___________________ (Full Name), residing at ___________________ (Complete Address), aged ____ years, do hereby declare that I have leased the property located at ___________________ (Property Address), specifically Flat No. , to [Tenant’s Full Name] for the period from 1st April 2023 to 31st March 2024, at a monthly rent of ₹ (_______________ only).
I further declare that my total income during the financial year 2025-2026 does not exceed the prescribed limit under the Income Tax Act 1961, and I have not been assessed for tax during the relevant period. Additionally, I confirm that I do not possess a PAN card as of the date of this declaration.
I affirm that the information provided above is true and accurate to the best of my knowledge.
Signature of Declarant: ______________________
Date: ______________________
What to Do if Your Landlords Refuse to Share PAN Details?
If the landlord refuses to provide their PAN details, claiming an HRA exemption can become complicated. In such cases, first, talk to the landlord and explain the requirements for HRA claims.
If the landlord still refuses, the employee can write to the Income Tax department and ask for the landlord’s PAN details. They will need to provide the reason for the request along with the landlord’s personal information.
Alternative Deductions Under Section 80GG for Non-HRA Employees
For employees who do not receive HRA from their employers but still pay rent, Section 80GG of the Income Tax Act provides an alternative deduction. This deduction is capped at ₹5,000 per month and is subject to the following conditions:
The taxpayer should not be receiving HRA.
The taxpayer should not own a residential property at the location where they are claiming rent.
The deduction is the least of the following:
₹5,000 per month (₹60,000 annually)
25% of total income
Rent paid minus 10% of total income
Additionally, an individual cannot claim deductions under Section 80GG if they are already availing deductions for a home loan (either on interest or principal amount.).
Note on Rent Receipts for Employees Earning HRA Up to ₹3,000
Employees receiving an HRA of ₹3,000 or less per month are exempt from providing rent receipts. However, it’s a good practice to keep them for your personal records. This guideline is mentioned in the CBDT Circular No. 8/2013 dated 10th October 2013, and Circular No. 20/2015 dated 2nd December 2015. Keeping rent receipts ensures you have all necessary documentation if needed later.
What Happens If Documents Are Not Submitted for HRA Claims?
If the required documents and declarations are not submitted when claiming HRA for amounts above ₹1 lakh, the employee will not be eligible for the tax exemption. The HRA amount will be added to the employee's salary and taxed according to the applicable tax slab. To avoid this, ensure all necessary paperwork is submitted on time.
Claiming HRA When Paying Rent to Family Members
If an individual is paying rent to their parents, they can claim HRA provided certain conditions are met:
The property must be owned by the parent(s), and the individual must reside in it as rented accommodation.
Rent should be paid to the owner(s) of the property or to both parents if the property is jointly owned.
A valid rental agreement should be prepared to document the rental arrangement.
Rent receipts, duly signed by your parent(s), must be collected and retained to avoid issues during tax filing.
Your parent(s) must declare the rental income in their tax returns, as it is taxable under their name.
However, paying rent to your spouse is not eligible for HRA claims. Tax authorities generally view such an arrangement as an attempt to evade taxes, making it invalid for exemptions.
Conclusion
Understanding the requirements for claiming a House Rent Allowance exemption is essential for salaried individuals in India. Providing your landlord's PAN details ensures transparency and helps prevent fraudulent claims. Make sure to submit the necessary documents, including rent receipts and the PAN, to avoid complications during tax filing. By following the guidelines outlined in this blog, you can claim your HRA exemption smoothly and in compliance with tax regulations.
And remember, always be honest with your documentation to avoid any future complications. It’s better to take the extra time to get everything right now than face issues later.
Frequently Asked Questions
1. How much HRA can be claimed without a PAN card?
If the landlord does not have a PAN card, you can still claim HRA, but the deduction will be limited. In such cases, the maximum rent you can claim is up to ₹1,00,000 per year. However, you must provide alternative proof of rent payment, such as bank statements or rent receipts.
2. Is a PAN card required for a Rental Agreement?
A PAN card is not required for a rental agreement. However, if the rent exceeds ₹1 lakh annually, the landlord's PAN card details must be provided for HRA claims.
3. Is a landlord's signature mandatory for HRA?
Yes, a landlord's signature is generally required for the rent receipt and the declaration if the landlord’s PAN details are not available. This ensures proper documentation for the HRA claim.
4. Is a rent agreement mandatory for claiming HRA?
A rent agreement is not always mandatory for claiming HRA, but it is highly recommended that one be included for documentation purposes. The agreement can help substantiate the claim in case of any queries by the tax authorities.
5. Is it possible to claim HRA without providing rent receipts?
Yes, if your HRA is ₹3,000 or less per month, you can claim it without providing rent receipts. However, if your HRA exceeds ₹3,000, you will need to submit rent receipts to claim the deduction.
