Required to produce a registered rental agreement for tax exception?

866 votes

Yes it is true for this purpose. And even otherwise rental / lease agreement if notarized bears no weight in law. It has to be registered. Even besides rent / lease agreements any other contract, agreement, MoU, if merely notarized carries no value, has no bearing in law.

Advocate Mareesh Pravir Sahay LawRato

558 votes

Deduction for HRA is allowed under section 10(13A) of Income-TAx Act, 1961 (the Act) as the lowest of (i) 50% of salary (in Mumbai, Delhi, Kolkata or Chennai) or 40% of salary (in other places); (ii) HRA received; and (iii) excess of rent paid over 10% of salary.
In case of any employee claiming this deduction, the payer of the salary is required under the provision of section 192(2D) (inserted in the Act with effect from 01.06.2015), a person responsible for making payment of salary is required to obtain from such an employee evidence or proof or particulars of the claim, including proof of actual payment of rent. However, the form and the manner in which the particulars of any claim are to be frnished has not yet been prescribed by the Central Board of Direct Taxes (the Board) and there is nothing in the Act or in Income-Tax Rules, 1962 (the Rules) that requires an employer to insist on production of a registered rental agreement.
In fact, vide clause 5.3.9 of Circular No. 20 of 2015, dated 02.12.2015, the Board has categorically stated that salaried employees drawing house rent allowance upto Rs. 3,000 per month will be exempted from production of even a rent receipt for the purpose of TDS and, it is the Assessing Officer, who in the regular assessment of the employee, will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.
Moreover, registration of a rental or any other agreement is not a requirement under the Income-Tax Act, but under the Stamp Duty Act of the respective State. Usually, an agreement whose duration is longer than a year is required to be registered under the Stamp Duty Act of most States and even in such cases, non-registration would entail consequences only under the Stamp Duty Act and should not have any effect insofar as Income-Tax Act is concerned.
So long as an employee is able to furnish to his employer proof of having actually incurred expenditure on payment of rent, either in the form of a rent receipt, or a rental agreement (whether or not registered), the employer cannot refuse to consider it, unless he has evidence that the claim is not genuine.
In the light of the above position of law and facts, registration of a rental agreement is, therefore, NOT a requirement at all under the Income-Tax Act.

LawRato LawRato