Landlord’s PAN Mandatory for HRA Exemption

The Income Tax Department has laid down (via CBDT circular 8/2013 dated 10th October 2013) that
  • where the annual rent paid is more than Rs 1,00,000 per annum – It is mandatory to report the PAN of the landlord to the IT Department to claim HRA exemption.
  • in case the landlord does not have a PAN – one must obtain a declaration to this effect from the landlord with name and address of the landlord.
An annual rent of Rs 1,00,000 works out to Rs 8,333 per month – therefore if you are taking a house on rent and making a payment exceeding Rs 8,333 per month – remember to obtain the landlord’s PAN or you may lose out on the HRA exemption. In case the landlord does not have a PAN they must be willing to give you a declaration. It’s important to do this before you take the place on rent – saves you the hassle of running after your landlord for PAN at the time of tax filing. Do note that salaried employees earning HRA up to Rs 3,000 per month are exempt from the production of rent receipts. Though – we highly recommend you to keep those for your own record. This has been laid down in the CBDT circular no. 8/2013 dated 10th October 2013 as well as in 20/2015 dated 2nd December 2015.

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FAQs (Frequently Asked Questions)

What is an HRA allowance and how to calculate HRA?
HRA means House rent allowance in income tax. It means the component of salary received towards the rent payment and is allowed as deduction from taxable salary under section 10-13A. HRA exemption is allowed least of the below
  • Actual HRA received by the employee
  • 40 % of salary for non metro city or 50 % of salary if the rented property is in Metro city like mumbai, delhi, bengaluru , chennai, etc)
  • Actual rent paid less than 10% of salary.
For above calculation , salary would include basic, dearness allowance and fixed percentage of commission.
What documents are required for HRA exemption?
Documents like rent receipts, and rent agreement will be required to be submitted to the employer for claiming deduction for house rent allowance . If the payment of rent is more than Rs 1 lakh per annum, then PAN of the house owner will be required to be submitted. On the basis of these proofs, employers would provide deduction for HRA in form 16.
When is a rent agreement required for an HRA exemption?
Rent agreement and rent receipts are required by the employer before the end of the financial year for allowing deduction for the purpose of form 16.
When landlords pan mandatory for HRA exemption?
In case of rent payment per annum is more than Rs 1 lakh i.e more than Rs. 8333 per month , the employee needs to provide the PAN number to the employer mandatorily.

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