Any salaried individuals who reside in rented accommodation and pays rent to the landlord can claim the House Rent Allowance in respect of rental payments under section 10(13A) of the Income-tax Act, 1961. In case you don’t live in rented accommodation, this allowance will be fully taxable. Basically, the amount of HRA exemption is deductible from the total income of the individuals. HRA exemption helps employees to save the taxes. Keep in mind that the HRA received from your employer will be fully taxable if an employee is living in his own house or if he doesn’t pay any rent.
Who can avail HRA?
It is important to know that there are many people who are living with their parents or in their own houses, hence this tax benefit can be receive by salaried employees who have the HRA component as part of his salary structure, stating it as rented accommodation. On the other hand, an individual who does not receive HRA as part of her salary and is staying in a rented apartment can still claim the deduction in respect of rental payments under section 80GG of the Act.
How much deduction is exempted?
The deduction available is the least of the following amounts:
- Actual HRA received;
- 50% of [basic salary + DA] for those living in metro cities (40% for non-metros); or
- Actual rent paid less 10% of basic salary + DA
What documents do you need?
For claiming HRA exemption, you will be required to submit the relevant documents of rent receipts of the rent agreement issued by the landlord. Additionally, if your rent exceeds Rs. 1lakh, then it is mandatory for the employee to report the PAN card of the landlord.
Can HRA be claimed during the time of filing returns?
While seeking tax benefits on HRA, if one fails to justify the deduction of the amount from the total income it can attract penal consequences under the provisions of the Income-tax Act, 1961. The amount of HRA, in any case, will get reflected in Form 16 issued by the employer
Also, individual taxpayers not receiving a house rent allowance (could be non-salaried individuals as well) could claim a deduction for their rental expenses based on Section 80GG subject to specified limits.
How to claim?
Exemption under 80GG can be claimed by an individual while filing her income tax return. There is a specific form for this, Form 10BA. The form is available on the e-filing website of the income tax department—incometaxindiaefiling login website. In this form, the assessee claiming the exemption has to declare that he stays on rent in the particular property, and neither her nor her spouse and children own any property.
How to report exempt incomes in ITR
In the latest amendments of ITR Forms, it has been notified that the taxpayers will be required to provide break up of their salary details. Therefore, any portion of HRA which is taxable will require to be reported while itr filing.
Calculate HRA Deduction
All India provides you with HRA calculator to find that part of your income that is exempt from tax on account of payment towards House rent.