Can a miss at flexi declaration- take away the hra exemption

Hello There,

I work for an MNC, (India Pvt. Ltd). On finding my tax slip for the current FY, I found that against HRA Exemption value is shown 0.00; This amount has been taken from actual HRA paid (Lowest of three).

Being new to the company I was not aware of its process that I have to must declare HRA as flexi amount on a flexi-declaration web page withing the first 15 days of my joining- to part my compensation into Basics, HRA and Special/other Allowances.

Since, I have not declared there, I have been receving my salary only in two components - Basics and Special Allowances. In my case,the HRA amount (40% of basics) is taxed and paid clubbing with the special allowances. Though the HRA section is mentioned on my offer letter, I couldnt have it because of the mistake at declaration.I assumed that at the FY end on showing my residential status (Rented house) the 40% of my basics will get adjusted to the actual HRA paid by the employer.

But unfortunately, on talking to finance team - I heard sorry from them, My mistake is highlighted there for not declaring HRA at flexi declaration web page. They replied that they cant do anything on this now since the amount has been already paid to me clubbing with special allowances.

I would like to know if there be any policy through which I could justify my situation and bring down my carged tax amount by showing a part of my earnings under HRA ? Can I do anything during the ITR file and expect any refund ?

I believe though I'm eligible for HRA exemptions the system process gap is not availing me in this FY. I seek experts advise.

Thank you,

Hi,

As you are aware that lower of, 1) Actual HRA received from employer 2) Rent paid minus 10% of basic salary 3) 50 % or 40% of basic salary, does qualify for HRA exemption.

So prerequisite to claim HRA exemption is that you must receive “house rent allowance” from your employer.

In your case they have clubbed your HRA eligibility with special allowance, hence; you would not be eligible to claim HRA benefit even at the time of submitting IT returns.

You should convenience your payroll team to restructure your salary, show HRA separately out of special allowance in your annual tax computations/Form 16. They should not have any problem with this set up as special allowance is fully taxable and they just need to present it two parts (HRA & Spl All).

They would be hesitating because they would require adjusting your tax liability from March salary and there would be refund in your form 16. Tell your company that you are not submitting any rent receipts and not claiming HRA exemption from the company, but you would claim the same from Income Tax via ITR.

I have seen that generally companies follow employee friendly approach and employees should not suffer due to internal processes of a company.