How to assert HRA on lease paid to folks

Is a lease settlement needed for claiming home lease allowance (HRA) exemption if you happen to pay lease to your dad and mom?  Is it ample to supply proof like lease receipts, direct credit score of lease to mum or dad’s checking account or TDS (tax deducted at supply) on lease funds?

                       — Krishan Kumar

As per the provisions of Section 10(13A) of the Income-tax Act,1961, home lease allowance (HRA) exemption is just not out there the place the lodging occupied by the assessee is owned by him or the assessee has not really incurred expenditure on cost of lease. Based on the restricted information supplied, we assume that the dad and mom are the authorized and monetary homeowners of the home property and the identical is just not owned by the assessee. Also, the assessee is definitely paying lease to the dad and mom.

As per the provisions of the Act, learn with the Income-tax Rules, 1962, salaried people are required to furnish the desired particulars /proof to the employer in Form 12BB in respect of claiming specified exemptions/deductions. For HRA exemption, a person is required to supply to his employer, title, tackle and PAN (the place the mixture annual lease paid exceeds ₹1 lakh) of the owner.

Further, because the onus is on the employer to withhold applicable taxes from the worker, they’re obligated to gather ample documentation to confirm the claims of exemptions / deductions made by the worker. Though there isn’t any particular record of paperwork prescribed, the employer might also ask for particulars like lease settlement, lease receipts, mode of cost, and many others., earlier than permitting this deduction. In the absence of paperwork, this deduction could also be disallowed on the tax withholding stage. In case that is disallowed, relying on the information and deserves of the case, one can declare HRA deduction when submitting earnings tax returns. However, please be aware that the identical could also be additional probed by tax authorities.

In case the tax return is chosen for scrutiny, the tax officer might also search documentary proof (as he could deem match) in respect of HRA claimed. Hence, it’s advisable to keep up the next documentation in the direction of the HRA declare:

• Registered and notarized lease settlement, as relevant

•Rent receipts

•Payments by way of banking channels

• Cash funds backed by recognized sources / traceable to particular withdrawals from the checking account

•Disclosure of rental earnings in landlord’s ITR (together with landlord’s PAN)

It is worth it to notice that claiming of HRA exemption in respect of rental funds made to folks / partner/ family members could also be susceptible to litigation, thus it is very important preserve enough supporting documentation to substantiate the genuineness of such transactions.

Parizad Sirwalla is accomplice and head, international mobility companies, tax, KPMG in India.

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