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New Rule for HRA exemption – Landlord’s PAN must when rent paid per annum is Rs 1 lakh

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Till now, employees were required to submit the rent agreement / stamped rent receipts etc, to their employer to get HRA exemption.

In FY 2011-2012, Landlord’s PAN was made mandatory if rent paid was more than Rs 180000 per annum (Rs 15000/ month).

But now from FY 2013-2014, if annual rent paid is more than Rs.1 lakh per annum (i.e. Rs 8333 per month) , it is mandatory for the employee to give PAN of the landlord.

What is this new circular ?

“”   In a recent circular from Central Board of Direct Taxes (CBDT) NO 08 2013 F No 275 192 2013 IT B; if annual rent paid by the employee exceeds Rs. 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer.

In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee.  “”

What should you do if your landlord doesn’t have PAN?

If your landlord  does not have a PAN, you need not worry, as long as he/she is ready to sign a self declaration stating he does not have a PAN & his name & address . You need to submit a copy of this declaration to your employer

Download – Sample declaration format

What should you do if your landlord doesn’t give PAN & also refuse to give declaration?

There could be cases where the landlord refuses to provide PAN details or a declaration. In that case, an employer may reject the HRA claim due to lack of documentation as mentioned in the circular

In that case you have 2 options

  • a) Pay Rent but do not claim HRA exemption
  • b) Find new landlord who is ready to provide PAN

If rent upto Rs 3000 per month –  For administrative ease, salaried employees who get HRA up to Rs.3,000 per month don’t have to produce rent receipt.

 

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Avoid Bogus / Forged  Receipts

There might be cases where employees pay their rent in cash and landlord do not provide any rent receipts. Or they do not pay any rent .
In order to avail HRA exemption, they prepare rent receipts themselves and do forge signatures.
These all are covered under forgery cases and offences under giving false evidence and fabricating false evidence of IPC (Section 191 & 192). As per judgement by Delhi High Court in such case, an employer can also dismiss the employee for forging the rent receipts.

 ————————————————————————————————————

What is HRA Exemption – Section 10(13A) of Income Tax Act

Normally employees receive HRA (House Rent Allowance) as part pf their salary package. You can claim tax benefits if you are living in rental accommodation.

You will get deduction as follows : (minimum of following three)

  • a) HRA Received
  • b) Rent paid Less 10% of Basic Salary
  • c) 40% of Basic salary (50% for Metro Cities)

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How to avoid Landlord PAN Requirement

If your landlord doesn’t give PAN, discuss with him following options

1) Do Rent agreeement with Landlord’s other family member whose Income is below taxable limit. Get PAN of that member

2) Do Rent Agreement between Landlord & your family member (preferably whose Income is below taxable limit) and add a sub-let clause in the rent agreement. 

Then, do a fresh agreement between youself & your family member. You can then get rent receipts from your family member & show their PAN.

Your family member will not have much income as they receive rent from you & pay rent to the original landlord.


Please note that above points are just suggestions & should not be treated or claimed as Legal advice. We are not responsible for any future issues or problems.  Member should take decision based on their own situation and will be solely responsible for their actions.

Please share your experiences.  Is your landlord providing you PAN details or giving you the declaration ??

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