HOUSE RENT ALLOWANCE (HRA) EXEMPTION RULES AND ITS TAX BENEFITS

 HOUSE RENT ALLOWANCE (HRA) EXEMPTION RULES & IT'S TAX BENEFITS 

-HRA is covered under section 10(13A)of INCOME TAX ACT 1961. salaried employees who live in rented house can claim HRA to lower their taxes.  Partially or wholly the decision of how much HRA needs to be paid is made by employer. Part of salary is apportioned  to HRA. 

1. condition for claiming HRA EXEMPTION 

- salaried individual only can claim HRA (self employed cannot claim HRA however self employed can also claim deduction of rent under section 80GG of incom tax act 1961.)

- stay in rented Accommodation 

- Rent paid exceeds 10% of salary 

- HRA is part of salary 

- Not paying rent to spouse. 

2. HOW MUCH DEDUCTION CAN BE TAKEN? 

- Deduction available is least of the following:-

I. Actual HRA received 

II. 50% of (Basic salary+DA) for living in Matro cities (40% for other no metro cities) 

III. ACTUAL RENT PAID -10%OF BASIC SALARY +DA

let's understand with the help of some examples below  

HRA CALCULATOR https://incometaxindia.gov.in/Pages/tools/house-rent-allowance-calculator.aspx

3.DOCUMENTATION IN CASE OF SUBMITTING PROOF TO EMPLOYERS

I. Rent receipt provided by landlord (if Total annual rent paid is more than Rs 100000/- than PAN number of landlord mandatorily to be mentioned. If PAN number is not provided than take a declaration from the landlord of not holding the PAN number) 

II. Rent agreement should be furnished if demanded by the employer. 

III. I t is always advisable to pay rent by cheque or by electronic payment mode. 

4.Can Mr. ABC claim HRA by paying rent to family members? 

Yes! HRA can be claimed by paying rent to parents. 

Following steps needs to be taken

.Mr. ABC needs to be make rent agreement with the parents. 

.He can pay rent to the parents and claim benefits. 

. He needs to transfer money to their bank account. 

Please Note:- That HRA cannot be claimed by paying rent to spouse. 

5. FREQUENTLY ASKED QUESTIONS? 

I. HRA exemption and Home Loan deduction can be both claimed? Yes

II. Two rented house in two different location can HRA be claimed for both?  NO, only one house

III. HRA includes electricity /maintenance charges? No,  it only includes rent paid 

IV. Does a tenand have to pay TDS on the rent paid to landlord? Yes TDS @5%UNDER SECTION 194IB if rent exceeds Rs 50000/- per month.