How to assert tax deduction on lease if you’re sharing the flat

If you’re sharing a flat, then claiming tax deduction on lease can develop into difficult. In this piece, we talk about 5 issues that you need to be careful for.

Ensure your identify is on the settlement

It is essential to your identify to be on the lease settlement or the go away and license settlement for the flat. Without this, you won’t be able to assert tax deduction on the lease you have got paid.

This requirement applies regardless of whether or not you get a home lease allowance (HRA) out of your employer or not, however need to declare tax deduction on lease below part 80GG.

Tax deduction on lease needs to be in proportion to the funds you make.

When you’re sharing a flat, there could also be some doubt about what quantity of the full lease you’ll be able to declare as tax deduction. According to Prakash Hegde, a Bengaluru-based chartered accountant, if there are 3-4 folks sharing the identical premises, one can declare the deduction in proportion to the cash you have got truly paid as lease.

For instance, if the full lease is ₹30,000 and you’re paying ₹7,000, then you’ll be able to solely declare ₹7,000 monthly as home lease deduction.

If you’re staying in a (paying visitor) PG lodging, preserve lease and meals funds separate

“If you’re staying in a PG and your lease and meals are bundled in a single cost, you won’t be able to assert the deduction for lease. Keep the funds separate,” mentioned Hegde.

“If your lease paid every year is greater than ₹1 lakh, it’s essential have the owner’s Permanent Account Number (PAN) quantity to assert deduction. Even your employer will ask for the PAN in such a case, for tax deducted at supply (TDS),” he added.

Deduct TDS in case your landlord is an NRI

If your landlord is a non-resident Indian (NRI), you must deduct tax at supply. This requirement comes into play no matter lease quantity. You have to use for a Tax Deduction Account Number (TAN) with the intention to deduct tax and the TDS should be deposited with the federal government inside 7 days of the tip of every month. You may even need to file quarterly TDS returns and challenge the TDS certificates to your landlord. For doing all this, you will want to get the PAN of the owner.

Deduct TDS if the full lease exceeds ₹50,000 monthly

If the full lease to your flat exceeds ₹50,000 monthly, you must deduct TDS at 5%, even when your landlord is a resident Indian. The identical necessities of getting a TAN, paying the tax deducted into the federal government account, and submitting TDS returns will apply right here too. Some specialists say you’ll be able to deduct the TDS below this part in a single go within the final month of tenancy as an alternative of deducting TDS every month.

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