What is HRA?
House Rent Allowance or HRA is a salary component paid to employees by an employer towards the accommodation cost of living in that city. Even though it is a part of your salary, unlike your basic pay, HRA isn’t entirely taxable, subject to conditions (a percentage of HRA is exempted under Section 10 (13A) of the IT Act, 1961).
The salary or pay for individuals can be defined as the sum of their basic salary, DA (dearness allowance), and any/all other commissions as applicable. HRA deduction calculation for employees residing in a metro will be 50% of the basic salary and is 40% for residence in a non-metro city. In case of salaried individuals without a DA component or commissions in their remuneration, the HRA allowance will be 40 or 50% of their basic pay.
The actual amount which you can claim for deductions under HRA will be the lowest of the three provisions:
(i) HRA received
(ii) Rent paid minus 10% of (Basic + DA)
(iii) 40% of (Basic + DA) (50% in case of Mumbai, Chennai, Kolkata, and Delhi).
HRA in New Tax Regime
The new regime has witnessed a lot of changes when compared to the old regime. However, one of the biggest changes that are to be pointed out is the fact that the new regime will not have some of the exemptions or deductions from the last tax regime. These include the House Rent Allowance or HRA as well. Thus, if you opt for the new tax regime and file your taxes accordingly, you will not be able to enjoy the deduction for HRA.
Documents Required to Claim Tax Exemption on HRA
The main document that has to be provided at the time of the claiming tax exemption for HRA is rent receipts/rental agreement. Being a taxpayer, you will be eligible for this exemption even if you are paying rent to your parents.
As the taxpayer, you will have to submit your rent receipts/rental agreement to avail of tax exemption on HRA. The PAN details of the landlord/landlady to be provided in the cases where the annual rent of the housing unit exceeds the mark of Rs.1 lakh.
FAQs on HRA Calculator
1. I have forgotten to submit rent receipts to my employer. How can I claim HRA tax benefit now?
Ans: In this case, you can claim the tax benefit on HRA at the time of filing income tax returns. You will have to keep the proof of rent payment handy, as you may be required to submit these documents to the Income Tax department to authenticate your claim.
2. Can anyone claim tax exemption on HRA?
Ans: No, not everyone can claim tax exemption on HRA. Although HRA is part of the salary of most employed individuals, the exemption can only be availed by those who pay rent. HRA exemption is also not applicable for self-employed individuals.
3. Can I claim tax exemption on HRA and deduction on home loan interests at the same time?
Ans: Yes, this is possible. You may be living in a rented house in one city while you own a house (for which you are repaying a home loan) in another city.
- You can claim tax exemption on HRA for the rent paid.
- You can also claim tax deduction on the home loan interest paid.
- Tax deduction can be claimed on home loan principal repayment as well.
- Can I claim HRA tax exemption when paying rent to a family member?
- You can claim tax exemption on HRA if you are paying rent to your parents. However, you should have sufficient documents that serve as proof of this transaction.
4. HRA is not part of my salary, but I stay in a rented accommodation. Can I get any tax benefits?
Ans: If an individual pays rent for an unfurnished/furnished house, he/she can claim tax deduction on the rent paid (under Section 80 (GG) of the Income Tax Act), provided HRA is not part of his/her salary. He/she should furnish Form 10B for this purpose.
5. Can the maintenance charges that I pay for my apartment be included for HRA tax exemption?
Ans: No, HRA exemption can be claimed only for the rent paid. You won't be able to claim a tax deduction for the maintenance or electricity charges. These charges are also not considered as the landlord's earnings when calculating his/her income tax.