Tenants: Why Your Landlord's Pan Matters

In India, a landlord's Permanent Account Number (PAN) is required by a tenant if they are to claim tax exemption for their rent payments. This is known as House Rent Allowance (HRA). If a tenant's annual rent exceeds 1 lakh rupees, or 8,333 rupees per month, they must furnish the PAN of their landlord to their employer. If the landlord does not have a PAN, the tenant can instead submit a signed self-declaration from the landlord stating they do not have one.

Annual rent paid exceeds Rs. 1,00,000

In India, if a tenant's annual rent exceeds Rs. 1,00,000, they must provide their landlord's Permanent Account Number (PAN) to their employer to claim the House Rent Allowance (HRA) exemption. This measure was introduced by the government to address instances of employees submitting fake rent receipts to claim the HRA exemption and avoid paying taxes. Additionally, it was found that some landlords were not declaring their rental income in their tax returns. By requiring the landlord's PAN, the government can verify the authenticity of the rent amount mentioned in receipts and ensure landlords are properly reporting their rental income.

If a tenant's annual rent exceeds Rs. 1,00,000, or their monthly rent exceeds Rs. 8,333, they must obtain their landlord's PAN. This information must be submitted to the employer, along with details such as the rent paid, landlord's name, and address. In cases where the landlord does not possess a PAN, the tenant can provide a written declaration from the landlord confirming their name and address. This declaration should be obtained before renting the property to avoid any inconvenience at the time of tax filing.

It is important to note that salaried employees earning an HRA of up to Rs. 3,000 per month are exempt from producing rent receipts. However, it is recommended to maintain proper records, including rent receipts and rental agreements, as these may be requested by the employer or tax authorities during an audit.

The HRA exemption is calculated based on the least of the following amounts:

• Actual HRA received from the employer
• Excess of house rent paid over 10% of the employee's salary
• 50% of the salary if the employee lives in a metro city (Mumbai, Delhi, Kolkata, Chennai) or 40% if they live in a non-metro city

The term 'salary' in this context includes dearness allowance but excludes other allowances and perquisites.

Landlord refuses to share PAN details

If you are a tenant paying rent and receiving a House Rent Allowance (HRA) every month, you are eligible for tax deductions according to the prescribed limit of HRA exemption. To avail of these benefits, you must submit your rent receipts to your employer annually when they collect tax proof.

If your annual rent exceeds Rs. 1,00,000, it is mandatory to report your landlord's Permanent Account Number (PAN) to your employer. However, if your landlord does not have a PAN, they can sign a self-declaration stating as much, along with their name and address. You can then submit this declaration to your employer and still avail of the HRA without a PAN.

"I, [full name and address of the declarant], aged [age], do hereby declare that I have leased [property address] from 1st April 2018 to 31st March 2019 to [name of lessor] at a monthly rent of Rs. [amount]/- ( [amount in words] only). Further, I do hereby declare that my total income during the financial year 2018-2019 did not exceed the statutory limit prescribed under the Income Tax Act, 1962, and I have not been assessed for tax and do not have a PAN card.

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

Verified today, the [date] day of [month and year]

[Date, place]

[Name of the Declarant]"

If your landlord refuses to provide their PAN details and is also unwilling to sign a self-declaration, you have a few options. You can try negotiating with your landlord to adjust the rent to account for the tax you would save through the HRA exemption. You can also try to get the PAN details of the landlord's spouse or family member if they are willing to "claim" the rent on their PAN.

Additionally, you can try reporting the landlord to the income tax department, as they are likely not showing rental income in their tax declaration. However, this option may not be advisable if you are concerned about potential retaliation from the landlord, such as eviction or rent increases.

To avoid such situations in the future, it is recommended to request the landlord's PAN details at the time of contract signing and before moving in. Having a proper rent agreement in place that includes the landlord's PAN can help prevent issues with claiming the HRA.

Tenant claims HRA exemption

The House Rent Allowance (HRA) is a component of an employee's salary that is provided by the employer to help cover the cost of living in rented accommodation. The HRA is initially considered part of an individual's taxable income, but if certain conditions are met, it is possible to claim a tax exemption. This exemption is available to both salaried individuals and self-employed individuals, although the process for claiming it differs slightly between the two groups.

HRA Exemption for Salaried Individuals

Salaried individuals can claim an exemption for HRA under Section 10(13A) of the Income Tax Act. To do so, they must meet the following conditions:

• Live in rented accommodation
• Receive HRA as part of their CTC (Compensation, or Cost-to-Company)
• Submit valid rent receipts and proof of rent payments

The calculation of the HRA exemption will depend on factors such as salary, rent paid, HRA received, and the city of residence of the employee. The lowest of the following amounts can be claimed as exempt:

• Actual HRA received
• 50% of [basic salary + dearness allowance (DA)] for those living in metro cities (Delhi, Kolkata, Mumbai, or Chennai)
• 40% of [basic salary + DA] for those living in non-metros
• Actual rent paid minus 10% of [basic salary + DA]

It is important to note that if the annual rent paid exceeds Rs. 1,00,000, the employee must also submit the PAN (Permanent Account Number) of the landlord to their employer. If the landlord does not have a PAN, a self-declaration stating the same, along with their name and address, must be provided.

HRA Exemption for Self-Employed Individuals

Self-employed individuals cannot claim HRA but can avail of tax deductions for rented accommodation under Section 80GG of the Income Tax Act. To claim this deduction, the following conditions must be met:

• Be self-employed or salaried
• Not have received any HRA during the year for which the deduction is claimed
• Neither the individual, their spouse, their minor child, nor the Hindu Undivided Family (HUF) of which they are a member should own any residential accommodation at the place where they currently reside, perform duties of office or employment, or carry on their business or profession

Documentation Required for HRA Exemption

Regardless of employment status, certain documents are typically required to support an HRA exemption claim:

• Rent receipts: These should include details such as the landlord's name, address, rental period, the amount paid, and the tenant's name. They should be duly signed or stamped by the landlord and provided for each rental payment made during the financial year.
• Rent agreement or lease deed: This document outlines the terms and conditions of the rental agreement, including the rent amount and duration, and serves as legal proof of tenancy.
• PAN of the landlord: In some countries, such as India, providing the PAN of the landlord is mandatory for claiming HRA tax exemption.
• Declaration of HRA: This form states the amount of HRA received and the details of rental expenses, helping employers calculate the eligible HRA exemption limit.
• Utility bills: While not always mandatory, providing utility bills can further substantiate the claim by demonstrating residence at the rented accommodation.

Landlord has no PAN

If you are a tenant paying rent and receiving a House Rent Allowance (HRA) every month, you are eligible for tax deductions according to the prescribed limit of the HRA exemption. To avail of these benefits, you must submit your rent receipts to your employer annually at the time of the collection of tax proof.

If your annual rent exceeds Rs 1,00,000, you are required to report your landlord's PAN number to your employer. However, if your landlord does not have a PAN, you need not worry. You can simply obtain a self-declaration from your landlord stating that they do not have a PAN card, along with their name and address. This declaration can then be submitted to your employer, and you can still avail of the Rent Receipt without PAN.

> I, [full name and address of the declarant], aged [age], do hereby declare that I have leased [property address] from 1st April ‘2018 to 31st March ‘2019 to [name of lessor] at a monthly rent of Rs. [amount]/- ( [amount in words] only). Further, I do hereby declare that my total income during the financial year [financial year] did not exceed the statutory limit prescribed under the Income Tax Act,1962, and I have not been assessed for tax and do not have a PAN card.

>

> I, [name of declarant], do hereby declare that the above is true to the best of my knowledge and belief.

>

> Verified today, the [date] day of [month and year]

>

> Date: [date]

> Place: [place]

>

> [Name of The Declarant]

It is important to note that this declaration must be signed by your landlord. Additionally, salaried employees earning HRA up to Rs 3,000 per month are exempt from providing rent receipts for tax deductions. However, it is recommended to keep these records for your own reference.

Tenant pays rent by cheque

In some countries, a tenant may need to provide their landlord's PAN (Permanent Account Number) for tax purposes. This is required if the annual rent paid by the tenant exceeds a certain amount. In such cases, the tenant must submit the rent receipts along with the landlord's PAN details to their employer during the collection of tax proof. If the landlord does not have a PAN, the tenant can submit a self-declaration form signed by the landlord stating that they do not have a PAN.

Now, regarding the tenant paying rent by cheque, here are some detailed instructions:

Writing a Cheque for Rent Payment:

• Date: On the upper right-hand side of the cheque, fill in the current date. You can use any common date format, such as DD/MM/YYYY or MM/DD/YYYY. Include the month, day, and year to ensure the cheque is valid.
• Payee's Name: In the "Pay to the order of" section, write the name of the landlord or the rental company, as specified in your lease agreement. Ensure you confirm the correct payee with your landlord to avoid any issues.
• Rent Amount in Numbers: To the right of the payee's name, write your rent amount in numerical form. For example, if your rent is $1100, write "1100.00". Include both dollars and cents, even if your rent is a round dollar amount.
• Rent Amount in Words: Below the payee's name, there will be a line with the word "Dollars" on the right. Write out your rent amount in words here. For cents, express it as a fraction with 100 as the denominator (e.g., for $350.46, write "four hundred and fifty 46/100"). If there are no cents, write "no/100" instead of "00/100" to prevent fraud.
• Memo Line: On the lower left side, you can include a memo or note about the cheque's purpose. While not mandatory, it is helpful to specify the month's rent you are paying and your apartment number, especially if your personal information on the cheque does not include the rental address.
• Signature: On the right of the memo line, sign the cheque. This step should be done just before sending the cheque to your landlord to prevent the risk of fraud or theft.

Additional Information:

• It is recommended to have a mutually agreed-upon alternative payment method with your landlord in case issues arise with the primary method.
• Always ask for a receipt when paying rent by cheque or cash to have proof of payment.
• In some places, landlords are required by law to provide a receipt for in-person rent payments and must be given at the time of payment.
• If you are unsure who to pay the rent to, especially in cases where the building ownership might have changed, seek guidance from the relevant rental authority or tribunal.

Frequently asked questions