House Rent Allowance or HRA can help you save a lot in taxes if you are clever enough to understand how it works. Nowadays most work opportunities require people to travel to places away from private homes and reside at rented apartments or houses for travel convenience. You can make use of this expenditure to save yourself some cash in taxes when filing for ITRs. You simply need to be aware of a few tricks which will help you in this regard.
How to save money from HRA deduction?
House rent allowance deductions will save you a pretty penny if you are smart in your approach. There are many ways in which you can claim HRA and use it when filing your ITR. Here are some useful tips that will help you save money in a better way:
Have a rent agreement with your landlord
It is always advisable to have a rental agreement with your landlord so that everything is documented and comes with legal proof. A rental agreement should contain all information like rent, utilities, extra expenses, and so on. This would act as proof of your residence and the fact that you are paying to reside in the place you have mentioned.
Rental agreement with parents and relatives
Did you know that you can claim an HRA deduction even if you live with your parents or relatives? Yes, people can file this under HRA deduction if there is a properly signed rental agreement between the two parties. You can draw up a rental agreement with your parents or relatives for the sake of formality and present it as your HRA when filing taxes. This will then be counted as you renting a separate place of your own. This is applicable if the property belongs to your parents or relatives.
Try making bank deposits
If you are renting a place and desire to claim HRA, you should try to make the rent payments through a banking medium. Avoid making cash payments as it will be difficult to prove and keep track of. Bank payments will allow you to have solid proof of your monthly payments which will in turn help with HRA deductions. Make sure that the payments are made from your account to the account of the landlord himself or herself.
Collect signed receipts for cash payments
Now, many landlords or landladies may not be comfortable with bank payments for a variety of reasons. If you find yourself in such a situation, make sure you have signed receipts from your landlord after every monthly rent payment. This will allow you to have some kind of proof that you make rent payments every month.
Add all utility payments to your rental agreement
When you are drawing up a rental agreement, make sure to include all maintenance and utility charges that you will be paying during your stay. It can be anything like the water bill, electricity bill, and so on. Some apartments charge a high amount in maintenance which can also be added to the actual rent amount paid every month. Including these charges when making an agreement will again offer you proof that you make payments outside the base rent as well.
These are some smart tips that will help you save money when filing for taxes. HRA deduction can be a great way to save on taxes when filing returns and will also assist you in securing a good place for yourself. To know more about HRA, you can visit https://www.turtlemint.com/save-tax-on-house-rent-allowance/. You need to make sure that you have a valid legal rental agreement with all payment details in place so that it’s easy for you to make claims on house rent allowances.