What is Rent Receipt: Process, Components & Tax Benefits

Tenants must know the details of a rent receipt and its importance. Read on to develop a detailed knowledge of the same.

A rent receipt is an important document which acts as proof of rent payment. When a tenant pays rent, the landlord/ landlady must provide a rent receipt with his/ her signature on it.

Below are uses of a rent receipt:

• One can use rent receipts to claim House Rent Allowance (HRA)
• Rent receipts are also important documents that are necessary to claim tax benefits

The landlord provides rent receipts. The receiver must store it carefully and submit it to the HR and Accounts Department at their workplace to claim house rent allowance (HRA). Alternatively, one can also submit the rent receipt to the employer.

 

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Submitting a rent receipt will vary from one organisation to another. It will depend on company policies. However, one can submit rent receipts quarterly, half-yearly or annually.

The HR and Accounts team will verify the documents submitted before they allow you to claim tax exemptions for HRA.

The components of a valid rent receipt are as follows:

• Name of Landlord
• Tenant’s Name
• Detailed Address of the Property
• Amount of Rent
• Duration of Rent
• Landlord’s Signature
• Tenant’s Signature
• Revenue Stamp in case the cash payment exceeds ₹ 5000 per receipt
• Landlord’s PAN details in case the rent exceeds ₹ 1,00,000 or ₹ 8,300 annually
• Medium for rent payment (cheque, cash or online payment)

Given below are tax benefits with respect to HRA deduction u/s 10 (13A):

• HRA rebate brings down the taxable income
• If an individual has availed of a home loan and needs to pay EMI, they can claim tax deductions as well
• Additionally, if they own a house and lives in a rented flat in the city of employment, then the person needs to provide a logical explanation of why they are living in rented accommodation for claiming the HRA tax benefits
• A taxpayer can claim HRA deductions while filing Income Tax Returns if you live with your family, namely your parents. All that they need to do is to produce a rent receipt as proof of payment

Suppose an individual doesn’t receive HRA from his company. In this case, they can avail of the rent exemption benefit u/s 80GG of the Income Tax Act.

As per the mandate of Section 80GG of ITA, the taxpayer can claim the lesser of the following in place of the house rent that they need to pay:

• ₹ 5000 monthly, i.e., ₹ 60,000 annually
• Amount paid as rent minus 10% of Gross Total Income
• 25% of Gross Total Income

The valid components of a rent receipt have been discussed above.

Given below is a general format of a rent receipt:

You can avail of free services of online rent receipt generator tools to generate and download this important document. Given below are the general steps to do so:

Step 1: Fill in your name and the accurate amount of monthly rent

Step 2: Provide the landlord’s name, complete address of the rented accommodation and PAN

Step 3: Provide the details of the duration for which you require the rent receipts

Step 4: You’ll be redirected to a new page where you can view the sample, print or download the rent receipt

You need to keep in mind the following factors regarding rent receipts:

• Making online rent payments enables easy recording and tracking of transactions
• Make sure you ask for a rent receipt with a revenue stamp. This is important for filing ITR
• If your monthly rent exceeds ₹ 3000, you need to share rent receipts with the employer to claim exemptions related to HRA
• You need to provide your landlord’s PAN details if the annual rent payment exceeds ₹ 1 lakh. If PAN details are unavailable, the landlord needs to provide a declaration along with filled-up Form 60
• The rent agreement needs to be valid. It must have every relevant and crucial detail, namely duration, details of monthly rent and utility bills
• If a rented accommodation is shared among many people, then the details of all the tenants need to be shared along with the ratio of the division of the payment of rent and other utility bills among them
• If a taxpayer is paying a higher amount than what is mentioned in the rent agreement, calculation of tax exemption is usually based on the rent receipts provided by the employee

To sum up, a rent receipt is an essential proof of Rent payment. One needs it for claiming tax benefits while filing ITR. Some of the important components of rent receipt are the names of the landlord and tenant, their signatures, duration and the amount of rent. Nowadays, with the advancement of technology, one can quickly generate and download rent receipts from any free online rent receipt generator.