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It is often seen that people pay their house rent in cash. Often the tenant himself wants to pay the rent in cash. Sometimes it is also seen that the landlord also asks for the house rent in cash. There is no problem in paying the house rent in cash, but sometimes you may get a notice from the Income Tax Department. To which you will have to respond.
Pay rent online or by check
If you are living on rent, then you should pay the rent online or by cheque. This will give you proof of the amount paid as rent. If you are not doing this and paying rent in cash, then it is possible that you will receive an income tax notice which does not match your income and expenditure. In such a situation, you will have to show some important documents to the Income Tax Department. So that it can be proved that you have paid the rent. You may need these 4 documents.
1. Valid rent agreement
If you are a tenant, you must have a valid rent agreement. This means that you must have a valid rent agreement with your landlord. Along with this, you should also ensure that the rent agreement is subject to income tax rules. Like if your monthly rent is more than Rs 50 thousand, then it is necessary to deduct TDS from it. The rent agreement should state whether TDS will be deducted on the rent and if yes, how it will be deducted. Apart from this, the rent agreement should include all the basic information of both the landlord and the tenant. Along with this, both should also have PAN details.
2. Rent receipt
To claim HRA, you must have a valid rent agreement as well as a rent receipt. That is, you must keep the receipt of the rent paid to the building owner. The rent receipt proves that you have actually paid the house rent to the landlord. While claiming HRA, you must submit the rent agreement along with the rent receipt.
3 Online Rent Payment Details
So no one asks you about the mode of rent payment, but if you get an income tax notice due to some confusion then you need the bank details. If you are paying in cash then you cannot give this proof. All CAs and tax experts say that rent should always be paid online like UPI, net banking or credit card. This gives you solid proof that you have paid the rent. Which no one can deny.
4. It is mandatory to get the PAN of the landlord
Landlord's PAN is required while filing ITR or HRA claim in the company. This lets the Income Tax Department know who actually received the rent paid by you. Even if you are paying rent in cash, you have to provide the landlord's PAN. Otherwise you will get less tax benefits. Let us tell you here that if your total rent is more than 1 lakh, then you have to provide the landlord's PAN number. Otherwise you cannot claim HRA on an amount more than one lakh. Note that this page should be correct. The Income Tax Department is sending notices to people who enter wrong PAN numbers these days.