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HRA

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What is HRA?

HRA i.e. House Rent Allowance is the amount paid as a part of salary by the employer to the employee. Employee can get tax benefit on this HRA amount if he is living in rented house and paying rent. This simply means that if your salary skip has HRA component, then you don’t have to pay income tax on this amount. However you can’t save income tax on the full amount.

 

How much HRA can you claim?

If you are living in a rental house or paying for your accommodation and do not get HRA from your employer then also you are applicable for the tax deduction in income tax return. These people can also claim for HRA exemption under section 80(GG) of IT act .

Actual HRA offered will be the lowest of the following 3 provisions:

  1. Rs.5000 per month
  2. 25% of your total income
  3. Actual paid rend is reduced from 10% of basic salary.

Though there are some conditions which should be fulfilled if you want tax deduction in this case. The criteria are as bellow:

  • You should be salaried or self-employed and paying rent for accommodation.
  • You haven’t received any HRA in the financial year in which you are claiming for HRA exemption.
  • As per HUF our spouse or minor child should not own house registered on their name.

How exemption on HRA is calculated?

The exemption on HRA is calculated as per 2A of Income Tax Rules. As per the rule 2A, the least of the following is exempted from salary under Section 10(13A) and does not form part of the taxable income.

  1. Actual HRA received from employer
  2. For those living in metro cities: 50% of (Basic salary + Dearness allowance)
  3. For those living in non-metro cities: 40% of (Basic salary + Dearness allowance)
  4. Actual rent paid minus 10% of (Basic salary + Dearness allowance)

When you cannot claim HRA Exemption?

If you are receiving HRA but are staying in our own apartment, then you cannot claim the HRA exemption benefit. Always remember that the whole HRA amount received will be taxable in your hands.

Documents required to claim tax exemption on HRA

The following documents will be required to claim tax exemption on HRA. They are as follows -

  1. Rent receipts by tax payer if he/she wants to avail tax exemption on HRA.
  2. If an individual living in a rented accommodation whose rent paid exceeds Rs.1 lakh in a financial year, then the PAN details of the landlord need to be submitted along with the HRA claims.
  3. A self-declaration needs to be given by the landlord in case he/she doesn't have a PAN card.

FAQs

a) Can I get tax rebate if I am staying in my own house?

No, you cannot claim HRA Exemption in this case.

b) I have a house in Delhi; but am staying on rent in Bhopal?
Yes, you can claim HRA.
c) My house is under construction & I have taken another accommodation on rent in the same city?
Yes, you can claim HRA.
d) Can I get both HRA tax exemption and tax rebate on my home loan?
Yes, you can; where you have rented a house (for yourself) even though you have your own home, for which you are paying a home loan through EMIs. In this case you have to prove that your house (for which you are paying home loan) is far away from your work place.
e) Does HRA falls under 80C of Income Tax Act?
No, House Rent Allowance falls under Section 10(13A) of Income Tax Act.