Detailed guide for Rent Receipts for HRA and Tax Saving

Rent Receipts example
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A rent receipt is a document that is used to keep a record of rent payments for a specific period of time. A landlord is the one under the liability of issuing it and it is in fact the right of the tenant to get it in exchange for the rent paid by him. 

It is an important document to avoid the dispute between the landlord and the tenant. A rent receipt is all the more important documents while filing annual tax returns and claiming HRA (Housing Rent Allowance).

Benefits of rent receipts 

A copy of rent receipt
Rent Receipt Format

1. To protect yourself against the bad landlords

Living in rented accommodations is a common practice these days. Many of the contracts turn sour due to disputes because of unwanted rules or restrictions on tenants. At times, the landlord also resists giving rent receipts to reduce or hide their net taxable income. Asking for rent receipts can actually save you from the unethical intentions of the landlord.

2. To maintain a clean rent history

Rent history enables a paper trail. The rent receipt will allow you to submit proof of rents paid in time while you are changing rental home or even you are applying for a home loan. In the absence of a rental receipt, it is quite difficult to prove money paid as rent and that too regularly.

In many cities with cut-throat housing competition, landlords are reluctant in offering their property to people with dubious rental history as only documents build your credibility.    

3. Tax benefits

Employers provide House Rent Allowance (HRA) to their employees living in rented accommodations.  The amount of tax benefits that can be procured on rent paid depends upon the fact that whether the tenant is a salaried person getting HRA from his employers or if you pay rent without any HRA received from employers.

Indian Income Tax Law also offers benefits to people living in rent without getting HRA. However, the tax benefits are different in the above two cases. Availing benefits, in either case, will require you to have every month’s rent receipt.  This has been explained in detail in the next paragraph.

Tax benefits available to salaried people getting HRA from their employers

 If you fall in this category, then you are permitted tax exemption under Section 10 (13A) of the Income Tax Act, with regards to the HRA received by you, subject to certain limits and conditions. The first clause applicable to the tax exemption is that one should actually be giving rent for a housing accommodation occupied by them. It clearly implies that the accommodation and the place of employment should be at the same place. Also, one should not be the owner or co-owner of the accommodation for which the rent is being paid. 

Rent paid by people who are not in receipt of HRA

Tenants can get some deductions with the aid of Section 80GG of the Income Tax Act on the rent paid by a person. Self-employed people and employees who do not receive HRA from their employers can claim this exemption. Deduction from one’s total income is granted as a benefit to the tenant.

However, the exemption is limited to 25% of the total income, or surplus of rent actually paid on 10% of the total income. Furthermore, the maximum deduction that can be claimed by the tenant not receiving HRA in a year is Rs 60,000 and Rs 5,000 per month.

Format of rent receipts:

Make sure your rent receipt does not miss the following key informational elements along with a proper rent agreement.

  • Date of Payment 
  • Time Period of Payment
  • Amount agreed upon 
  • Name of the landlord (or Company Name)
  • Name of Tenant or Paid By
  • Address of home/office/shop, or whatever the property  is being rented
  • Signature  of Landlord with or without company stamp

Lastly, it is important to keep all receipts safe and secure by the tenant for availing benefits as mentioned above. If the Landlord does not have a rent receipt booklet, nowadays many websites offer a template of rent receipts that can be downloaded by the landlord and tenant for their convenience.

We hope you like the details about the Rent receipt. Do let us know via comments if you want to know furthermore details about Rent receipts.