How To Save Tax On House Rent?
The amount of money a tenant pays a landlord to utilize a residential property for a predetermined duration of time is referred to as house rent. The location, size, amenities, and general condition of the property all play a role in determining the rent cost. As a tenant, your rent payment represents a sizable monthly expense. But did you know that paying rent tax-free is possible? Yes, you read that correctly. Here are some suggestions for reducing the tax on rent:
HRA exemption: If you receive a house rent allowance (HRA) from your employer and you are a salaried employee, you are eligible to claim a tax exemption. Actual HRA received, 50% of the basic income (for employees living in metro areas) or 40% of the basic salary (for employees living in nonmetro areas) and actual rent paid less than 10% of the basic salary all count towards the exemption amount.
Rent receipts: You must give your employer a copy of your rent receipts to claim the HRA exemption. The rent receipts must include information on the landlord's name, the amount of rent that was paid, and how long it was paid for.
Rent agreement: A rent agreement between the landlord and tenant is required if you pay a monthly rent of more than Rs. 50,000. The sub-registrar's office must receive the rent agreement for registration.
Pay rent by cheque or online transfer: To leave a paper record of your rent payments, it is best to pay rent by check or online transfer. You will benefit from this if there are any disagreements with the landlord.
Joint mortgage: If you and your spouse or another family member are coborrowers on a joint mortgage, you are eligible to get tax benefits on the interest paid on the loan. Up to two mortgage loans are eligible for the tax benefits.
Principal payment on a mortgage: Section 80C of the Income Tax Act of 1961 provides tax deductions for principal payments made on mortgages. The maximum tax deduction allowed is Rs. 1.5 lakh.
Claim tax benefits on rental property: If you own a rental property, you can deduct the rent from your taxable income. A deduction can be made for both the property's maintenance and repair costs as well as the municipal taxes that were paid on the property.
Claim tax benefits on interest paid on education loan: If you took out an education loan to pay for your further education or the education of a dependent, you may be able to claim tax benefits on the interest you paid.
Section 80E of the Income Tax Act of 1961 provides the tax benefits.
Home insurance premium: Section 80C of the Income Tax Act of 1961 allows for tax benefits on premium payments made for home insurance policies. The maximum tax deduction allowed is Rs. 1.5 lakh.
Claim tax benefits for donations: Section 80G of the Income Tax Act of 1961 allows donors who have donated to charitable organizations to do so. Donations made to particular qualifying institutions are eligible for tax benefits.
Conclusion
For tenants, housing costs are a significant expense that, in some cases, can be deducted from taxes. Understanding one's rights and obligations under a rental agreement and local rental legislation is crucial for both landlords and tenants. Finally, there are several techniques to reduce your house rent tax. You can save money and lessen your tax liability by using the aforementioned advice. To avoid any penalties, it is advisable to consult a tax professional and file your tax returns on time.