Claiming HRA – What to do if landlord does not have a PAN?

CA Sandeep Kanoi

If you are paying rent and getting HRA allowance every month, you are eligible for tax deductions according to the prescribed limit of HRA exemption. If you want to avail of the benefits, you must submit the rent receipts to your employer every year at the time of the collection of tax proof. 

Central Board of Direct Taxes (CBDT) has vide CIRCULAR NO. 8/2013, Dated: Dated: October 10, 2013 said if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with  the name and address of the landlord should be filed by the employee.

If your house owner does not have a PAN, you need not worry, as long as he/she is ready to sign a self declaration stating he does not have a PAN. You can submit a copy of this declaration to your employer and avail of the HRA deduction.

Rent Receipt without PAN- Sample declaration format

A Format of Deceleration May be as follows :-

Date

To

Name & Address

DECLARATION

I ____________(Full name and address of the declarant) aged ____ do hereby declare that I have leased the Flat No._______________________________ From 1st April’2013 to 31st March’2014 to ___________( Name of lessor) at a monthly rent of  Rs. _______/- ( __________________ only). Further I do hereby declare that my total income during the financial year 2013-2014 did not exceed the statutory  limit prescribed under Income tax Act,1962 and have not assessed to tax and does not have a PAN card .

Verification

I,_________________ do hereby declare that what is stated above is true to the best of my knowledge and belief.

Verified today, the _____________ day of _________________

Date : ________________Place : ________________

(Name of The Declarant)

EXTRACT FROM THE CIRCULAR NO. 8/2013, Dated: Dated: October 10, 2013 RELATED TO HRA

Under section 10(13A) of the Act, any special allowance specifically granted to an assessee by his  employer to meet expenditure incurred on payment of rent (by  whatever name called) in respect of  residential  accommodation  occupied  by  the assessee  is  exempt from Income-tax  to  the  extent as may  be  prescribed,  having  regard  to the area or place in which such accommodation is situated and other relevant considerations.  According  to  Rule
2A  of  the  Rules,  the  quantum  of exemption allowable  on  account  of  grant of special allowance to meet expenditure on payment of rent shall be the least of the following:

(a)  The actual amount of such allowance received by the assessee in respect of the relevant period i. e. the period during which the accommodation was occupied by the assesse during the financial year;  or

(b) The actual expenditure incurred in payment of rent in  excess  of  1/10  of the salary  due  for  the relevant period; or

(i) Where  such  accommodation is situated in  Bombay, Calcutta,  Delhi or Madras, 50% of the salary  due to the employee for the relevant period;  or

(ii) Where  such accommodation is situated in any other places,  40% of the salary due to the employee  for the relevant period,

For this purpose, “Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other  allowances and perquisites.

It  has to be noted that only the expenditure  actually incurred  on  payment  of rent in  respect of  residential  accommodation  occupied  by  the assessee  subject  to  the limits laid down in Rule 2A, qualifies for exemption  from income-tax. Thus,  house  rent allowance  granted  to an employee  who  is residing in a house/flat owned by him  is not exempt from  income-tax. The  disbursing authorities should satisfy themselves in this regard by insisting on production of  evidence of actual payment of  rent  before excluding  the House Rent Allowance or any portion  thereof from the total income of the employee.

Though  incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction  under  section  10(13A),  it  has  been  decided  as  an  administrative  measure  that salaried employees drawing house rent allowance  upto Rs.3000/-  per  month will be exempted from  production  of rent  receipt. It  may,  however, be  noted  that  this concession  is  only for the purpose of  tax-deduction  at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that  the employee  has  incurred  actual expenditure on payment  of  rent.

Further if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with  the name and address of the landlord should be filed by the employee.

(Article was first published on 03.12.2013 and republished on 07.08.2015)

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