Looking to Save Tax on House Rent Allowance?

HRA Tax Exemptions

Tax Savings on HRA

There are various avenues from the government to save tax on the income. The deductions allowed are on investments in instruments allowed in Section 80C, Section 80CCC, and Section 80CCD.

  • For instance, the combined deductions allowed under the above mentioned three sections is up to Rs. 1,50,000. You can segregate your deductions across the three sections, but the total value cannot exceed the threshold amount. On top of the deductions allowed under the above three sections, an additional Rs 50,000 deduction is allowed under section 80CCD if invested in the National pension scheme.
  • Deductions are also allowed under Section 80D, 80DD, 80DDB if the investor has invested money in medically insuring his own health and his family.

House Rent Allowance: An Important Component of the Salary Structure

House rent allowance is one of the components of the salary structure provided by the employer to the employee to assist in the rental expenses of their accommodation. HRA exemption can be availed under section 10 if one lives in a rented accommodation.

HRA and Its Applicability across the Multiple Facets of Income Tax Payer Types:

  • Self Employed or salaried employees who don’t have HRA: They can claim for exemptions and deductions under section 80GG. The claim can be made if the rent is paid between 10 to 25 percent of the salary. The taxpayer will have to on form 10BA show that he or she satisfies all the conditions to be eligible for tax deductions under section 80GG.
  • Tax exemption for the salaried individual:

The lowest deduction among the three options below are accounted for when calculating the deduction figure:

  • HRA as prescribed by the employer
  • 50% of the employer salary for metros and 40% for regional areas. The metros included are Delhi, Mumbai, Kolkata, and
  • The actual rent paid by the employee each month minus 10% of the salary.

Sometimes the rent can exceed 1 lakh. Tax exemptions can be claimed in such scenarios provided the PAN card of the owner and the rent receipts are furnished appropriately.

  • Tax exemptions on both rental and owned property: If the owner of a property in one city is renting a place in another city for work purpose is liable for benefits on tax exemption on home loan and rent paid. The income from the owned property for which the income taxpayer has taken a loan is tax liable.
    • Note, in case the location of the owned property and the rental property is in the same city, deductions won’t be available for tax exemptions.
    • Both husband and wife can claim for tax exemptions provided they can both supply rent receipts towards one house rent.
    • If the rent is paid to any member of the family, tax exemptions on house rent allowance can be claimed, if the member of the family owns the house. It becomes easy for the IT department to figure out the expenditure if the payment of the rent is made monthly and via bank transfer.
    • The tax deductions vary for the period the salary has changed or when the location of the habitat has changed.

Documents Required Availing HRA And Your Basic Rights As A Tenant.

  • Submit the rent agreement for the current financial year to the employer
  • Proper rent receipts detailing the rent amount, details of the landlord and the address of the property.
  • If the annual rent is 1 lakh or more, the landlord must provide his PAN card details
    • Make sure to say no if the landlord persists on oral tenancy agreement rather than written.

Date for Filing the HRA Tax Exemption through ITR and What If You Miss It.

  • The HRA tax exemption can be claimed by the salaried personnel by filing ITR and the last date of which is July 31st of a financial year
  • For self-employed, there are two dates depending on whether auditing is required on their income.
    • July 31st if no audit is required
    • 30th September-If audit is required
  • In case you don’t meet the deadline of providing receipt to the employer, you can always claim HRA at the time filing your ITR

Tool Available to the Tax Payers to Ascertain the House Rent Allowance Figure.

HRA tool is a very intuitive and free software which will assist you in calculating House rent allowance and tax exemptions that can be claimed for it.

HRA is an Instrument to Lower the Burden of Rental Expenditure for the Tax Payer.

HRA is a benefit given by the employer even though he is under compulsion to do so. It’s at the employer’s discretion; he can refuse it any time.

You May Also Like: Tax-Saving Tips for Buying and Selling a Property

About Sashi 545 Articles
Sashi Singh is content contributor and editor at IP. She has an amazing experience in content marketing from last many years. Read her contribution and leave comment.

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