The full form of House Rent Allowance. It is paid by an employer to employees as a part of their salaries. It is paid to meet the accommodation expenses. Salaried individuals who live in rental premises can claim exemption of House Rent Allowance.
Employees are required to submit the rent receipts to their employers to claim the tax benefit. The employers, in turn, will calculate exempt House Rent Allowance and deduct the same from the employee’s taxable salary. You can know exempt house rent allowance from your Form 16.
The House Rent Allowance exemption rule is that the least of the following will be deducted from salary as an exemption under House Rent Allowance:
The House Rent Allowance calculation formula has been explained below with the help of an example:
Raj works in a company in Kanpur. He lives in a rented flat. He pays INR. 15,000/month as rent. Following is his salary structure.
|Particulars||Amount (In INR)|
|House Rent Allowance||1,75,000|
|Actual Rent Paid||1,80,000|
The least of the following will be the exempt House Rent Allowance:
INR. 1,30,000 will be exempt from House Rent Allowance. Hence taxable House Rent Allowance will be INR. 45,000 (1,75,000-1,30,000).
Under Section 80GG, a deduction is allowed to an individual who pays rent without receiving any House Rent Allowance. So you can claim a deduction from total income if you:
If all these conditions are fulfilled, a deduction is available as the least of the:
The important point to keep in mind is that deduction under Section 80GG is not allowed to an individual who receives House Rent Allowance from an employer. Hence, check your Salary Slip to see if you are receiving any House Rent Allowance. If you do, you can’t claim a deduction for rent paid under section 80GG.
Sameer works for a pharma company in Ahmedabad and receives a salary of INR 7,20,000. He receives a House Rent Allowance of INR 3,00,000 per month. He pays house rent of INR 2,40,000 to his landlord
The least from the following will be exempt from Taxes:
INR 60,000 will be exempt from Sameer’s total income under section 80GG.
Yes, you can. The benefits of House Rent Allowance and deduction for Home Loan can be availed simultaneously.
If you are living in a rental house & your own house is occupied by your spouse, children, and/or your parents, you can claim:
If you are living in a rental house & your own house is also given on rent, you can claim:
Exemption on House Rent Allowance is the lowest of
– Actual House Rent Allowance received from an employer
– 50% (for Metro) or 40% (for Non-Metro) of Basic Salary
– Annual Rent Paid – 10% of Basic Salary
No. House Rent Allowance is an allowance and is exempt from Salary Income. House Rent Allowance exemption is allowed u/s 10(13A) of the Income Tax Act. You can know your exempt House Rent Allowance from Form 16 issued by your employer.
You can go for a rental agreement with anyone except your spouse and claim House Rent Allowance. So, if you have a rental agreement with your parents, you can ask for the House Rent Allowance tax benefit from your employer.
Salaried individuals can file ITR-1 while claiming exempt House Rent Allowance. However, salaried needs to file ITR-2 if income is more than INR 50,00,000.
An employee needs to submit the PAN of the landlord if the total rental payment for a year exceeds INR 1,00,000. If the monthly rental payment is more than INR 50,000 then the employee needs to deduct TDS at the rate of 5% u/s 194IB and need to file Form 26QC. In the case of NRI Landlord, an employee needs to deduct TDS on payment and TDS Return in Form 27Q needs to be filed every quarter.