House Rent Allowance (HRA) exemption is a benefit provided to salaried individuals to help them with rental accommodation expenses. It allows individuals to reduce their taxable income, decreasing their tax liability.
HRA Calculator
The amount of HRA you can exempt is the lowest of the following:
Actual HRA received: This is the amount mentioned as HRA in your salary slip.
Rent Paid minus 10% of salary: This considers your actual rent expenditure and a basic deduction.
HRA limit based on city type:
- 50% of your basic salary + dearness allowance (DA) for metro cities (Delhi, Mumbai, Kolkata, Chennai).
- 40% of your basic salary + DA for non-metro cities.
To claim HRA deduction on your Income Tax Return (ITR), you may need the following documents depending on the situation;
- Rent Agreement: A valid rent agreement for the current financial year. This document serves as proof that you have rented accommodation.
- Rent Receipts: Duly stamped rent receipts for the monthly rent payments made during the financial year. Even if you pay rent electronically, receipts are important.
- Landlord’s PAN Card: If your total rent paid in a year exceeds Rs 1 lakh, a copy of your landlord’s PAN card must be submitted to your employer to claim HRA exemption.
- Proof of Payment: Bank statements, online transaction receipts, or any other evidence showing the actual payment of rent can also be helpful.
- Rent to Family Members: Income tax laws do not prohibit paying rent to family members. However, maintaining proper documentation even when the rent is paid to a family member is crucial.
If filing an ITR is mandatory for the family member, the individual should request them to declare the rent received as income in their tax return.
- Employee Declaration Form: If you’re a salaried employee, your employer might require you to fill out a declaration form to claim an HRA exemption. This form typically includes details about the rented accommodation and the rent paid.
These documents are usually required to be submitted to your employer if you want them to deduct HRA and reflect it in your Form 16. However, you can still claim HRA while filing ITR even if you didn’t claim it earlier.
The above information is for general understanding. It’s advisable to consult a tax advisor for specific details and the latest regulations.
