House Rent Allowance or HRA is what most salaried people receive from his or her employer and this is the area where most of the salaried people save tax. Almost every salaried employee takes the HRA benefit because Income Tax department allows claiming tax benefit on HRA for rent paid to parents as well.
So now we have stricter rules for saving tax under HRA.
What has changed?
The PAN card of the landlord was needed for rent over Rs. 180,000 per annum or Rs. 15,000 per month but now the limit has been reduced to Rs. 100,000 per annum or Rs. 8,333 per month.
How the Change Can Impact you?
PAN card being involved for rent paid above 100,000 means that if you are paying rent to the landlord who does not report his income from house rent, then either he has to accept 8,300 as rent or he has to provide his/her PAN card and report the income completely. Also as PAN card is being involved means that there cannot be any discrepancy in HRA being deducted and income of the landlord or landlord may have to face the consequences.
If anybody is paying rent to parents for the sake of HRA exemptions, you have to pay less rent or provide PAN card of your parents. Once you have the PAN card, you have to make sure that your parent’s income is reported correctly.
What if Landlord does not have (or provide) PAN?
Ideally they will have it because they own a property to rent out but still if they don’t have it or they don’t want to provide it, its you who should submit a declaration stating the same along with the complete landlord’s details. If you don’t submit the details then your HRA claim will become zero and everything would become taxable income.
Is this a Pain Point for Salaried People or Landlord?
This new rule is really a pain point for genuine people claiming HRA because of those who used to claim HRA without actually paying any rent or landlords making income in the form of rent but not showing that as an income. There is no way for an IT department to know if the house is rented or not from landlords unless they report and so it is introduced from the side where people claiming HRA. You have to make sure, you get the PAN card of the landlord or else you will be taxed.
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