HRA Exemption : Saving tax from help of House Rent Allowance
The benefit of HRA Allowance is available only to a salaried individual who receives HRA as a part of his salary and is staying in a rented accommodation.The amount of HRA exemption is deductible from the total income before arriving at a taxable income. This helps the employee to save tax. But do keep in mind that the HRA received from your employer, is fully taxable if an employee is living in his own house or if he does not pay any rent.
HRA is exempted under Section 10 (13A) of the Income-tax Act, 1961 subject to submission of Rent receipts or the Rent agreement with the house owner.
It is mandatory for the employee to report the PAN Card of the 'landlord' to the employer if the rent paid is more than Rs 1,00,000 annually. However, if your landlord does not have a PAN then you must get a declaration from him regarding the same.
It is mandatory for the employee to report the PAN Card of the 'landlord' to the employer if the rent paid is more than Rs 1,00,000 annually. However, if your landlord does not have a PAN then you must get a declaration from him regarding the same.
How much is exempted?
The exemption for HRA benefit is the minimum of:
i) Actual HRA received
i) Actual HRA received
ii) 50% of salary if living in metro cities, or 40% for non-metro cities; and
iii) Excess of rent paid annually over 10% of annual salary
iii) Excess of rent paid annually over 10% of annual salary
Some further conditions for claiming benefit of HRA exemption :
1. Exemption is not available to an assessee who lives in his own house, or in
a house for which he has not incurred the expenditure of rent.
2. Salary for this purpose means basic salary, dearness allowance, if provided
in terms of employment and commission as a fixed percentage of turnover.
3. Relevant period means the period during which the said accommodation
was occupied by the assessee during the previous year.
Link for HRA calculator : https://www.incometaxindia.gov.in/Pages/tools/house-rent-allowance-calculator.aspx
Praveen Chandolia
Partner
Contact us for all taxation & related queries at taxmunshi@gmail.com, +91-9990492337
