Rent Receipt: Role In Claiming The Best Tax Benefits (2024)

You must have heard of the importance of rent receipts. It is one of the important documents, especially for people who work on the salary method of making a living. This is because their rent receipts help them get HRA benefits which can play a crucial role as far as income tax refunds are concerned.

So, if you too would like to know more about it, we are going to share the best details and help you get a clear picture of what to expect out of the rent receipts. So, let us check out the details.

What Is A Rent Receipt?

Rent receipts are a statement that acts as proof that you are paying a certain amount of monthly rent to your landlord in exchange for staying at the place you call home.

This is a very important document as salaried employees who have a component called house rent allowances in their package are entitled to seek a refund or tax deduction owing to this receipt.

So, here we are going to share the details of the different components of the receipts and how you can generate one and the importance of it as well. We will be shedding light on all the particulars in a clear and precise manner.

The Importance Of Rent Receipts

One of the key reasons why you need rent receipts is that it helps you get the right tax refund. The good thing about these receipts is that if your salary package has a component called a monthly rental allowance, it means that you are entitled to get a tax refund as the job is willing to pay you a part of your rent component.

When you have a rent receipt, it means that you paid a part of your salary for the sake of bearing the living expenses. This is why when your tax liability will be calculated, the rent receipt is taken into account. In most cases, your TDS will also be adjusted accordingly because you are not liable to pay tax on the HRA.

So, this is why the rent receipt is surely a very important document that serves a great deal of use. Most people need to ask their landlord to provide them with a rent receipt as it is only then that you will be able to access the details.

Components Of The Rent Receipt

A rent receipt cannot be an arbitrary document, it needs to contain some valid information. Here are some of the components it must have.

Name of the landlord
Name of the tenant
Amount of rent being paid
Tenure of rent
The property addresses
Signature of the landlord
Signature of the tenant
Method of payment
Revenue stamp
PAN details of the landlord. This is applicable if the annual rent payment exceeds Rs. 1 lakh.

What Is HRA?

Now that we have established the ground rules for what the rent receipts are, let us shift our focus to HRA and what it is all about.

The HRA is the tax concession that is offered to the employees. This is done because a part of the salary goes into paying for their accommodation. When you are filing for the HRA claim, your salary will only comprise the basic salary along with the dearness allowance component.

Calculating The HRA

At the end of every financial year, your employer will ask you to offer you a rent receipt. This is done so that they can calculate the tax liability and thereby claim the deductions on your behalf. Always remember that this process is only done if your salary package has one component listed as HRA.

If your salary is not offering you a house rent allowance, you will not be entitled to get these refunds. Also, if your monthly rent is less than Rs. 3000, you don’t need to submit any receipts.

Also, an important clause to be added here is that you only need to submit the rent receipt and not the rent agreement. However, when you are claiming the HRA benefit, you have to be sure that the rent agreement has been duly registered and signed. If this is not done, your tenancy will not be considered valid.

The Example

Let us give you an example to clear things up.

If suppose your basic salary is Rs. 50,000 and you pay a rent of Rs. 20,000.

Your employer offers you an HRA component of Rs. 10,000

Now let us see some numbers.

HRA= Rs. 10000

Rent paid less 10% of the basic salary = Rs. (20000 – 5000) = Rs. 15,000

50% of the basic salary = Rs. 25,000

So, here your HRA component is Rs. 15,000 and the remaining Rs. 10,000 is going to be taxable.

So, HRA entitles you to the rent paid less the 10 percent of your basic salary. This is the amount you are entitled to seek a refund for.

However, if your 50% of the salary amount turns out to be less than the computation, you will only be paid the 50% amount as the HRA refund. The proposition is to choose the lower of the two amounts.

We believe that you should now have a pretty clear picture of what to expect out of the HRA refund that you are going to get.

How To Generate A Free Rent Receipt?

So, now that you have made up your mind that you want to claim the HRA refund, you need to know the steps for the sake of generating the free rent receipt. It is simple and so here is all you need to do.

Head to the right platform. Here, you need to click on the tab that reads rent receipt generator.
On the page that pops, you will need to fill in the name of the tenant and the rent amount too
Then hit the continue bottom
Enter the details of the landlord, the PAN number if applicable and the address of the property as well
Now fill in the time period for which you need to generate the rent receipt and then click on continue
The rent receipt will be generated for your use

Rent Receipt In The PDF Format

If you want to get the rent receipt in a downloadable and printable PDF format, here are the steps you need to follow

Do all the above steps first
Now when the rent receipt preview is generated, click on the print button and you will be able to get copies of the receipts on the final screen
You can also choose to download the receipts on your device too

The Key Things To Remember

When you are looking to make the most of the house rent receipts, here are some of the key points that you need to keep an eye on.

The time period

If your rent paid is not even 10 percent of the salary amount, you are not entitled to get a tax refund. Also, it is important that when you are seeking a refund for a certain time period, your salary will only be considered for that period specifically.

The payment

You can make the rental payment in any mode you deem fit. There is no obligation for a card or bank payment. You can also choose to make the payment in cash if you so desire. The only thing you have to do is make sure that you collect the rent receipts with the details duly written on them.

Ownership

You have to be sure that you are not the owner or even the co-owner of the property for which you are paying the rent and claiming the HRA. This is the reason if you are living in your parents’ house, you can claim the HRA benefits provided you are paying rent to your parent and you can show so in your salary details.

The rent receipt submission

To minimise the load, it is not mandatory that you submit the rent receipt every month. You can choose to do so on a quarterly, half-yearly, or even annual basis. However, before the financial year ends, you need to make sure that rent receipts for all months are duly submitted to your employer so that he can analyse your tax liability accordingly. You can also check out the details of the rental agreement.

FAQ

Can you claim HRA even if you own the house where you live?

No, if you are the owner or even the co-owner of the place, you will not be able to claim any HRA benefits whatsoever. However, if you are living in your parent’s home, you can still choose to claim the HRA benefits provided you are paying rent to your parents.

What if my landlord doesn’t have a pan card?

The pan card of the landlord is only needed if you are paying an annual rent that sums to more than 1 lakh rupees. If this is the case and your landlord still fails to produce a PAN; they will need to submit a written declaration and form 60 which should be duly filled. The inability of the landlord to submit these will lead to loss at the tenant’s end as they will not be able to get the deductions.

Can you pay the rent in cash and still get a tax refund?

Yes, you can still choose to get a tax refund even when you have paid in cash. There is no rule as such regarding which payment method you need to choose. The only thing you have to make sure of is that you should be able to produce a rent receipt. This will entitle you to get a refund if you follow all the remaining criteria well.

Do you need to submit the receipts every month?

No, you don’t need to submit the receipts every month. You can choose to submit it quarterly or even bi-annually and even annually. The only criteria are that before the financial year ends, your employer should have the receipts for all the months.