How to claim HRA to maximise tax exemption U/s 10(13A), with Automated HRA Calculator U/s 10(13A)

If you are a salaried employee and staying in a rented
accommodation, you can claim the house rent allowance (HRA) exemption under
Section 10(13A) of the Income Tax Act, 1961. 

The HRA exemption is available for least of the following
amounts: a) Actual HRA amount received from the employer; b) the amount of rent
you pay for your house in excess of 10% of your basic pay; c) fifty per cent of
the basic salary, if you reside in a metro city, and 40% of the basic pay for
non-metro cities.

Download the Automatic House Rent Exemption Calculator U/s 10(13A)

 

For claiming the exemption, the
employee must stay in a rented house during the period for which the exemption
is being claimed and must have actually incurred the expenditure on payment of
rent. For computing the HRA exemption, salary means ‘basic salary’, dearness
allowance, if the terms of employment so provide, and commission based on a
fixed percentage of turnover achieved by the employee. While one can pay rent
to parents to claim the HRA exemption, they need to pay tax on the rent
received.
The employee will have to submit
rent receipt/rent agreement to the employer for availing the HRA exemption. The
employer needs to only obtain a rent receipt/rent agreement from the employee;
however, the employer is not required to verify the receipt for granting the
exemption to the employees. 
If the amount of rent claimed is more than Rs. 1,00,000 per
year, the Permanent Account Number (PAN) of landlord has to disclosed. If the
landlord does not have a PAN, the employee is required to submit a declaration
to this effect from the landlord along with the name and address of the
landlord.
Moreover, under the Income Tax
Act, an employee can claim the HRA exemption even if he owns a house but stays
in a rented accommodation. This will be possible in cases where the employee
owns a house in some other city and cannot stay in the house because of job
location. Also, if an employee has taken a loan from a bank or a housing
finance company to buy the house, he can avail the deduction of interest under
Section 24 of the Income Tax Act as well as repayment of principal towards loan
under Section 80C of the Act, even if one is claiming the HRA exemption while
staying in a rented accommodation in another city.
The rent receipt should have a
one rupee revenue stamp with the signature of the person who has received the
rent and other details such as the rented residence address, rent paid, name of
the person who has paid the rent. While HRA is a major tool to save tax, it is
equally important to keep every documentation properly, in case demanded by the
tax authority.
Earning Curve:
* Self-employed professionals
cannot claim the HRA exemption under Section 10(13A) of the I-T Act, 1961, as
they do not earn a salary
* For claiming the HRA exemption, the employee must stay in a rented house
during the period for which the exemption is being claimed
* While one can pay rent to parents to claim the HRA exemption, they need to
pay tax on the rent received
* The employee will have to submit the rent receipt/rent agreement to the
employer for availing the HRA exemption

Leave a Reply

Your email address will not be published. Required fields are marked *