Dummy Rent Agreement works?
For people who lie in the 30% tax bracket, how do you save taxes? Do you suggest making a dummy rent agreement on your parents name to save HRA? Got to know that if monthly rent is more than 50K, the tenant has to pay TDS as well. How do you account for it? Any suggestions on saving taxes?
You can pay rent to your parents. But then they'd need to show that in their income because it'll be counted on their Pancard.
Many people do this. Don't worry.
The company needs a rent agreement as proof for it. Should I create a dummy rent agreement on the name of my parents?
Yeah you can.
Anyways while submitting proof you need rent receipts and money should have been deducted from your bank account.
If you are doing this ensure
1. Pay your parents monthly the rental amount.
2. Enter into an agreement with them as Co -owners if their income is not in tax bracket or lower tax bracket than yours 3. If the rent is greater than 1Lakh PA you need to report their PAN to employee which in turn reflects in their AIS statement. Hence file ITR for your parents declaring rental income.
4. They can claim property tax paid and 30% of rental income as standard deduction . So if they are not having any other income you can pay up to 10 Lakhs each without having any tax burden on them.
5. But keep in mind as commented by above by @BangaloreLandLord the deductions depends on your Basic Salary and HRA component
With regard to TDS on rent - Yes you have to deduct if rent exceeds 50,000 per PAN. It has to be deducted @ 5% of the annual rent during the last month for which rent is paid. Within 30 days of deduction you have to pay TDS to the Government through Form 26QC mentioning details therein. The deducted Tax will reflect as tax credit in landlords 26AS/AIS.
BengaluruLandLord
Stealth
a year ago
Dummy rent receipt might not always work unless you are willing to cross 1lakh rent in 1 year in which case you will need to furnish your land lord's PAN details.
So.. here is the rule you might need to keep in mind:
Rent Paid should be greater than 10% of basic salary + DA.
In detail:
As per Rule 2A, the least of the following is exempted from salary under Section 10(13A) and does not form part of the taxable income.
Actual HRA received from the employer
For those living in metro cities: 50% of (Basic salary + Dearness allowance)
For those living in non-metro cities: 40% of (Basic salary + Dearness allowance)
Actual rent paid minus 10% of (Basic salary + Dearness allowance)
The company needs a rent agreement as proof for it. Should I create a dummy rent agreement on the name of my parents? I hope it'll not be an issue later.
You can but then your parents would also have to pay tax/ file ITR based on their income.
