Aug19
2021House Rent Allowance (HRA) is the allowance provided by an employer to their employee as a compensation for house rental expenses paid by the employee. It forms part of the salary paid by the employer to their employee.
House Rent Allowance or HRA is a salary component paid to employees by an employer towards the accommodation cost of living in that city. Even though it is a part of your salary, unlike your basic pay, HRA isn’t entirely taxable, subject to conditions (a percentage of HRA is exempted under Section 10 (13A) of the IT Act, 1961).
House rent allowance (HRA) is a basic component of your salary. However, most of us are not familiar about the rules that can help us save tax on it. If you are a salaried employee living on rent, then here's how you can use HRA to reduce your tax liability.
Salaried individuals, who live in rented houses, can claim the House Rent Allowance (HRA) to lower their taxes – partially or wholly. The allowance is for expenses related to rented accommodation. If you don’t live in rented accommodation, this allowance is fully taxable.
Computation of Exempt HRA Amount:
Meaning of Salary:
Metro-cities:
Requirement of PAN of the Landlord:
Section 80GG Deduction for House Rent:
If pay rent for any residential accommodation occupied by you, but do not receive HRA from your employer, you can still claim the deduction under Section 80GG. Conditions that must be fulfilled to claim this deduction:
You are self-employed or salaried
b. You have not received HRA at any time during the year for which you are claiming 80GG
c. You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of office, or employment or carry on business or profession.
In case you own any residential property at any place other than the place mentioned above, then you should not claim the benefit of that property as self-occupied. The other property would be deemed to be let out in order to claim the 80GG deduction.
The least of the will be considered as the deduction under this section:
Adjusted Total Income:
Note: Self-employed individuals can also claim benefits for their rental payment under section 80 GG of the IT Act.
Claiming HRA Deduction while living with Parents:
Example:
Mr. X, employed in Delhi, has taken up a house on rent for which he pays a monthly rent of ₹25,000. He receives a Basic Salary of ₹50,000 per month. He also receives HRA of ₹ 1 lakh from his employer during the year.
Computation of Exempt HRA:
Hence, ₹ 1,00,000 would be exempt from tax u/s 10(13A).