House rent allowance is paid by the employers to their employees as part of their salary break-up. It provides tax benefits for the rent employees pay for accommodations every year. Here is how to claim HRA if it is not a part of your salary component.
House Rent Allowance or HRA is enjoyed by every salaried individual and is paid by the employers to their employees. It provides tax benefits for the rent employees pay for accommodations every year. Claiming HRA is not difficult, however, you should be well versed with certain criteria like eligibility conditions, amount, rent receipts and other rules.
When, Where And How You Can Claim HRA?
You can claim HRA if your employer is providing it as part of your salary component. You need to submit the rent agreement for the current financial year to your employer along with duly stamped rent receipts. These receipts can either be monthly or quarterly. The rent receipts should have the following details.
- a) Rent amount
- b) Complete address
- c) Name and signature of the landlord
It is important to note that you need to submit your landlord’s PAN if your annual rent exceeds Rs 1 lakh.
How Much HRA You Can Claim For Tax Deduction?
HRA can be claimed on the least value of the below-mentioned factors:
- HRA amount as part of your salary
- Actual rent less 10 percent of your basic salary
- 50 percent of your basic salary for metro city residents or 40 percent of your basic salary for non-metro city residents
What If You Are Living With Your Parents?
You can still claim HRA if you are living in a property owned by your parents. You can claim rent paid to your parents. The rent you give will accrue as ‘income from other sources’ in your parents’ annual returns.
You Are Living In A Rented Accommodation But Paying EMI On House Loan. Can You Still Claim HRA?
Yes, you can still claim HRA and even tax benefits on the repayment of principal and interest amount on Home Loan, provided you have deeds, possession and other necessary documents. You can claim tax benefits under Section 80C of the Income Tax Act for principal repayment up to Rs 1.5 lakh. On interest repayment, you can claim upto Rs 2 lakh under Section 24.
Your Employer Is Not Giving You HRA. Can You Still Claim Rent You Are Paying On The Rented Accommodation You Are Living?
Yes, you can still do so under Section 80GG, but you need to meet certain conditions in order to claim it. Here are those conditions:
- a) You must be a self-employed or a salaried professional;
- b) You should not have received any HRA for the financial year you are claiming under Section 80GG;
- c) You or your spouse or your minor child or HUF you are part of should not own any residential property at the place you are currently living or working or carrying on business or profession.
- d) If you own a residential property at any place and receive income from it, then you are not eligible to claim tax benefit under Section 80GG.
Once you meet these conditions, you can claim deduction under Section 80GG on the least of the below-mentioned amounts:
- Rs 5000 per month
- 25 % of total income*
- Actual rent minus 10 percent of total income *
*This total income means income after deductions under Section 80. You will be required to submit Form 10BA with rent receipts to claim under Section 80GG.
Hence, it is extremely vital to go through the tax rules before you opt for HRA deductions in your annual returns.
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