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You would have definitely heard of the term house rent allowance or HRA. You must have seen it in your CTC breakup and your salary slip. So, what is this HRA? Can you claim tax exemption from HRA? How is the exemption calculated? and so on. So many questions will be there in your mind. CreditMantri discusses in detail about HRA.
About House Rent Allowance
It is up to your employer to give you an HRA. Those who get free accommodations along with their jobs will not get HRA. Thus, they cannot claim any tax exemptions towards it.
Under HRA, you will get an exemption on the least of the following amounts:
For example: let's take the following scenario:
Actual HRA Received From Employer
50% of (basic salary + dearness allowance)
50% of ((30,000 + 7000) * 12)) = 222,000
10% of ((30,000 + 7000) * 12)) = 135,600
Hence, ₹ 1,00,000 would be exempt from salary under section 10 (13A).
The following documents are required:
If your employer does not give you an HRA, you can still claim it under section 80GG. Conditions for claiming this deduction are:
If you own any other residential property apart from the one mentioned, you should not claim the benefit of that property as self-occupied. The other property would be deemed to be rented out to claim the 80GG deduction.
The least amount among the following will be considered for deduction:
Mr X works in a company in Chennai. The company provides him with an HRA, but he lives with his parents in their house. So, how can he make use of HRA?
Mr X can pay rent to his parents and claim HRA. He has to make a rental agreement with his parents and give them money every month. This way, he will be helping his parents and also save on taxes. Also, MR X’s parents have to report the rent they receive from X as income in their income tax returns. If their other income is below the basic exemption limit or taxable at a lower slab, they can save tax on the family income.
There is no restriction on both spouses claiming the HRA. If both the husband and wife are paying rent and are able to furnish the rent receipts, then both of them will get the benefit of HRA.
HRA is a great benefit offered by the employer. This helps you save on taxes mainly. You must however furnish the required documents correctly to make use of this allowance.
1. Can I claim HRA for 2 rented houses?
Yes, you can claim HRA for 2 rented houses if you satisfy the necessary requirements.
2. How much HRA Can I claim without receipts?
Generally, it is mandatory to submit receipts for rent paid above Rs. 3000. However, it is always good to get a rent receipt for the payment of rent irrespective of the amount or channel of payment.
3. How much rent is free from tax?
A person need not pay tax on rent if the gross annual value (GAV) of a property is under Rs. 2.5 Lakhs. But the person may have to pay the taxes if the rental income is the only primary source of income.
4. How do I claim my house rent allowance in Income Tax Return?
The taxable part of HRA will be mentioned in part B of your Form 16 under the ‘Gross Salary’ head according to Section 17(1). Copy this information and paste it in the 'Salary as per section 17' section of the ITR-1 form.
5. Why do we need to provide the PAN no: of the landlord?
The government has made it compulsory to declare the PAN details of the landlord in the exemption claim form. This is to ensure that the landlord declares the rental income when he files for IT returns.
6. Do I have to declare the rent from a family member?
If you have let out your house to a family member or a friend, then you have to declare the rent as an income.
7. Is signature mandatory on rent receipt?
If the monthly rent paid in cash goes above Rs. 5,000, then, it is necessary to affix a revenue stamp on the rent receipt. You must then get it signed by the landlord. Otherwise, it is not needed even if the rent is paid in cash.
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