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HRA: How to claim HRA deduction?

CA Sanya Kapoor 
on 05 June 2020

LinkedIn


ALL ABOUT HOUSE RENT ALLOWANCE!

A part of HRA can be claimed as a tax deduction according to Section 10(13A) of the Income Tax Act, if the following eligibility criteria are met

1) You should be a salaried individual.
2) You should receive HRA as a salary component. 
3) You should live in a rented house.
4) You should be actually paying house rent, i.e., the rent receipts should be issued in your name

HRA: All about house rent allowance

The amount of tax deduction that can be claimed over HRA is the least of the following:

1) Actual rent paid minus 10% of the basic salary, or

2) Actual HRA offered by the employer, or

3) 50% of salary when residential house is situated in Mumbai, Delhi, Chennai or Kolkata; 40% of salary when residential house is situated elsewhere

NOTE: Salary refers to the sum of basic salary, dearness allowance (DA) and any other commissions, if applicable for the purpose of HRA calculation. 

IMPORTANT POINTS TO REMEMBER FOR CLAIMING HRA DEDUCTION 

1) In case you are paying an annual rent of more than Rs 1 Lakh, the landlord’s PAN will be required to claim HRA exemption. If the landlord does not have a PAN in his name, a signed declaration should be sufficient. But if none of these are available, you may lose out on the tax deduction.

2) The House Rent Allowance (HRA) differs from one city to another. If you live in a metro city, namely Mumbai, Delhi, Chennai or Kolkata, you can claim up to 50% of HRA as tax deduction,  while if you live elsewhere, you can claim up to 40% of HRA as tax deduction. 

3) Since HRA is meant to provide for the cost of your rented accommodation, you cannot claim it when living in a self-owned house.

4) If you are staying with your parents and produce a rent receipt in the name of your parents, you can claim HRA exemption. However, your parents need to add the same rent to their income at the time of filing income tax returns.

5) You cannot pay rent to your spouse and claim HRA deduction on it.

 

WHAT IF YOU DID'NT RECEIVE HRA? SEC-80GG IS THE SOLUTION 

How to save tax when you live in a rented accommodation, but don’t receive HRA as a salary component? Or what if, you are a self-employed individual and hence don’t receive a salary at all? Worry not! You can still claim tax deduction under Section 80GG of the Income Tax Act.  

 

The maximum amount of deduction that can be claimed under Section 80GG of the Income Tax Act corresponds to the least of the following:

1) Rs. 5,000 per month (Rs. 60,000 per year); or
2) 25% of your gross total income; or
3) (Actual rent paid) – 10% of total income


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Category Income Tax
Other Articles by - CA Sanya Kapoor 




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