b) Effective rent paid each year more than 10% of the annual salary Some people create false rental income and try to apply for the HRA exemption. Home ownership – Since the rent is paid to the owners, the property must be the property of your parents. It may belong to one or both of your parents. Remember that you cannot own or co-own this property because you cannot claim a tax exemption for the rent paid to yourself. Saving taxes as a family – By presenting rental income and paying it, you can apply for an HRA exemption. Your parents can deduct property taxes and claim a 30% deduction on rental income. If they are in a lower tax bracket than yours, the family can save tax as a whole. If they are over 60, they also have a higher minimum income allowance (Rs.3 Lakh for people over 60 and Rs.5 Lakh for people over 80). If you don`t have taxable income, you can save significant taxes as a family. For the HRA calculation, the salary is the sum of allowances, basic salaries and other commissions. If you do not receive commissions or rental allowances, the home rental allowance is 40 per cent or 50 per cent of your basic salary, subject to certain conditions. Even if your parents have other sources of income, if their income puts them in a lower tax bracket than yours, it is still a profitable agreement. For example, if you are in the 30% tax class, but your parents are in the 10% category, you save 20% of the rent tax.
I was unable to file receipts on time and did not claim HRA through my employer? If your annual rent exceeds INR 1 lakh, you must provide your employer with your landlord`s PAN card data, in this case your parents. If your parents do not have a PAN card, they must make a statement to indicate it. You must also complete Form 60 and you must submit the return to your employer with this form. Otherwise, you cannot apply for a tax exemption for your HRA if the rent paid is higher than the INR 1 lakh per year. How does the Revenue Agency know that you actually made the payments? You must file proof of rent. In order not to avoid confusion or subsequent questions, make sure that you make payments by bank transfer or cheque instead of paying in cash. The idea is that there should be a clear paper trail for payments in addition to rental income. Supporting documents should clearly indicate, if any, rent, duration and additional payments, such as . B for supply bills.
It goes without saying that you cannot apply for the rent exemption you have paid yourself. If the unit is shared ownership by you and your parents, you are not entitled to exceptions. It is also one of the most common errors made in applying for an HRA exemption. HRA Proof of rent is not required, but may be requested by the income tax officer if he or she has any suspicions about your rental income. Let`s understand that by an example. Samiksha works at an MNC in Bangalore. Although her company provides her HRA, she lives with her parents in her house and not in rental housing. How can she benefit from this allowance? Samiksha can pay rent to her parents and benefit from the assistance granted. All she has to do is make a lease with her parents and pay them money every month.