SillyBurrito
SillyBurrito

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?

18mo ago
QuirkyNarwhal
QuirkyNarwhal

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.

SillyBurrito
SillyBurrito

The company needs a rent agreement as proof for it. Should I create a dummy rent agreement on the name of my parents?

QuirkyNarwhal
QuirkyNarwhal

Yeah you can.

Anyways while submitting proof you need rent receipts and money should have been deducted from your bank account.

FluffyTaco
FluffyTaco

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)

SillyBurrito
SillyBurrito

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.

DizzyPotato
DizzyPotato

You can but then your parents would also have to pay tax/ file ITR based on their income.

ZestyWaffle
ZestyWaffle

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.
  3. 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.
  4. But keep in mind as commented by above by @BangaloreLandLord the deductions depends on your Basic Salary and HRA component
ZestyWaffle
ZestyWaffle

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.

QuirkyBagel
QuirkyBagel

I just pay 30k to my dad as House rent

SparklyDonut
SparklyDonut
Google18mo

Donate to gobhi ji

Discover more
Curated from across
Personal Finance
by SillyBurritoProduct Manager

How to save taxes?

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...

Ask Grapeviners
by QuirkyRaccoonBarclays

Need some Tax Saving tricks

Hi Guys,

I wonder how people save maximum tax. I don't see any options for me to do the same. Can anybody give me some tips or tricks to save some Tax? My goal is to save maximum, and the Saving should be ready to use in a need(in case ...

Personal Finance
by GigglyPandaIBM

How to save money on taxation?

I am joining new org with 17LPA, I just got to know that my tax slab will be 30%. I never had to think about it for last 2 years because i was with 3.75LPA since 2 years when my career began. How should i start to reduce my taxable incom...