Employee salary is made of many components in which house rent allowance is the second most important one. But the difference between other allowances and HRA is that HRA is partly exempted from tax liability. Under section 10(13A), a certain amount of HRA is non-taxable. This benefit is available only to certain individuals who are salaried and stayed in a rented accommodation. The HRA tax exemption is not available to a self-employed professional or a freelancer.
This deduction is prescribed under the section 80GG which is applicable to individuals and HUFs. Also, if any salaried individual or HUFs claim this deduction then they must not claim any benefit under Section 10(13A). The person receiving house rent allowance must not have any family member or spouse or minor child having own accommodation in the same place where he/she is working. If the person owns a property in another place other than his/her workplace and also claim HRA tax exemption, then the owned property will be considered as let-out property, not as a self-occupied property. To satisfy such conditions, individual needs to declare the same by filing Form 10BA. New Amendments in Income Tax Rules for Charitable Trusts.
To satisfy such conditions, individual needs to declare the same by filing Form 10BA.
Under Section 80GG, individuals who stay in rented place but don’t receive any HRA from employers also can claim deductions. There is a certain house rent allowance exemption available for such condition.
Least of any of the following can be availed in such conditions:
- INR 5,000 per month
- Of the total Adjusted Income, 25 percent can be claimed
- Of the total Adjusted Income, minus 10 percent of the paid rent.
The required document you will need to submit to claim HRA tax exemption is either the rent receipts or the house rent agreement. Also, the PAN card of the landlord is mandatory to submit if the annual rent amount exceeds INR 1,00,000 annually / INR 15,000 monthly. Income Tax Return Liabilities Possessed on EPF withdrawals.
There are also provisions made for special cases so that taxpayers do not feel the excess burden of accommodation expenses. If one lives with parents and pays rent to them, then he/she can claim house rent allowance deductions. But the same is not allowed in case of rent paid to the spouse as according to Indian law, spouses are meant to stay in the same accommodation. Also, a taxpayer can claim benefit against home loan interest & principal repayment together. This HRA tax exemption will be only applicable if you work and stay at a rented accommodation in a different city.