Many salaried employees pay their rent in cash, but doing so can raise questions when claiming House Rent Allowance (HRA) while filing income tax returns.
HRA is a salary component that offers tax relief on rent paid, provided the employee lives in a rented home and meets the conditions laid down under the Income Tax Act.
But what happens when your landlord asks for rent in cash instead of accepting a bank transfer or digital payment? Can you still claim HRA?
The answer is yes, cash rent does not automatically stop you from claiming HRA. But you need proper proof to show that you really paid rent.
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You can still claim an HRA tax benefit even if you pay your rent in cash. To avoid problems, it is important to keep proper proof of the rent payment. Tenants should take a rent receipt every time they pay cash. The receipt should mention the landlord's name, address of the rented house, month covered, rent amount and how the payment was made. Having a rent agreement is also beneficial.
Tenants should keep all signed and dated rent receipts safely. If possible, they can also keep records of cash withdrawals from their bank account. But a bank withdrawal record alone does not prove that the money was paid as rent. If the total yearly rent is more than Rs 1 Lakh, the tenant generally needs to provide the landlord's PAN details while claiming HRA.
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