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Hiral Vakil
2019-03-07 13:36:36The full form of HRA is 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 HRA.
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 HRA exemption rule is that the least of the following will be deducted from salary as an exemption under HRA – House Rent Allowance:
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The HRA 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) |
| Basic Salary | 5,00,000 |
| HRA | 1,75,000 |
| LTA | 25,000 |
| Other Allowances | 12,500 |
| Gross Salary | 6,15,000 |
| 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 HRA. Hence taxable HRA 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 HRA. 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 HRA from an employer. Hence, check your Salary Slip to see if you are receiving any HRA. If you do, you can’t claim a deduction for rent paid under section 80GG.
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Sameer works for a pharma company in Ahmedabad and receives a salary of INR 7,20,000. He receives HRA 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 HRA 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 (HRA) is the lowest of
– Actual HRA received from an employer
– 50% (for Metro) or 40% (for Non-Metro) of Basic Salary
– Annual Rent Paid – 10% of Basic Salary
No. HRA is an allowance and is exempt from Salary Income. HRA 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 HRA. However, salaried needs to file ITR-2 if income is more than Rs. 50,00,000.
An employee needs to submit PAN of the landlord if the total rental payment for a year exceeds Rs. 1,00,000. If monthly rental payment is more than Rs. 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.
Hey @sushil_verma
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
For eg,
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.