Adeel Ahmed and his roommate are in a fix. They live in a rented apartment in Mumbai, paying Rs 42,000 a month. Until last year, they could very easily claim their house rent allowance (HRA). However, this year, Ahmed and his friend feel they may not be able to claim these deductions.
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.
However, in December, the Central Board of Direct Taxes (CBDT) said those paying more than Rs 15,000 as HRA every month, or Rs 1.8 lakh annually, need to furnish a copy of their landlord's permanent account number (PAN), along with the rent receipts. However, Ahmed's house owner is unwilling to provide a copy of his PAN. The requirement, however, is only for those who get HRA of above Rs 14,999 a year. Many, like Ahmed, have thus been left in a soup.
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.
As many have realised, the problem arises if the house owner is unwilling to provide a copy of his/her PAN. One would probably have to forgo his/her HRA deduction and claim for refund on a later date, say tax experts.
Some experts feel you could furnish a copy of the leave and licence or rent agreement, a copy of post-dated cheques to the landlord, bank account statements and a copy of the letter or email you had sent to the landlord asking for a copy of his PAN. However, most disagree.
Amitabh Singh, tax partner, Ernst & Young, says employers would not want to risk taking other documents, primarily because there are people who produce fake rent receipts. "The primary decision lies with the employer. The company may or may not be willing to take these documents as a substitute for PAN. Typically, they choose to be conservative and stick to the CBDT circular."
Human resource heads warn it is unlikely that your human resources (HR) department would accept these documents and exempt you from paying tax on HRA in the absence of the landlord's pan card copy. Officials say no mature organisation would accept these. "No employer will be willing to take a chance by accepting these documents. In case any kind irregularity is found, the company will be held responsible. Most companies will be strict about this norm," says Manish Verma, head (human resources), Principal Mutual Fund.
However, one could claim for a refund at the time of filing income tax returns. Homi Mistry, tax partner, Deloitte, Haskins & Sells, says, "One can approach the tax department with a copy of the letter or email, asking the landlord's PAN and his/her reply or no response and this should be proof enough to show the house owner was unwilling to share his PAN card." But be prepared to wait for at least six months for the refund!
So, when your lease runs out next time, and if you plan to look for another place to rent, make sure you tell your landlord you need a copy of his/her PAN card to claim for HRA even before you sign the rent agreement and hand the deposit. It will definitely save you the hassles.
Subscribe Updates, Its FREE!
February 1, 2012