Its time when you would be asked to submit proof of investment to your employer to save taxes. HRA (House Rent Allowance) has been one thing which confuses many people. so here answers to 8 frequently asked questions about HRA:
Read on…
Any salaried employee can claim HRA if they satisfy the following condition:
Also Read: How to Claim HRA Tax Exemptions while filing Income Tax Return?
The maximum HRA that can be claimed for tax exemption is minimum of
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The HRA calculation has been explained by an example:
Assumptions
HRA Exemption Calculation:
Download: ebook on Tax Planning for FY 2018-19
Rs 9,000 being the least of the three amounts will be the exemption from HRA. The balance HRA of Rs 6,000 (15,000-Rs 9,000) is taxable.
If the rent paid is less than Rs. 3,000 per month you need not submit any proof. But if the rent is more than Rs 3,000 you need to submit rent receipt / rent agreement to your employer. A one rupee revenue stamp affixed with the signature of landlord receiving the rent, with other details of the rented address, rent paid and name of the person who rents it, need to be mentioned on the receipt.
In case the annual rent exceeds Rs 1 lakh you also need to submit PAN Card copy of the landlord. In case landlord does not have PAN Card, you would need to submit a declaration from landlord stating the same. Download the declaration for landlord from here. Employers do not accept declaration anymore!
It is wise to still keep rent receipt and rent agreement because, at the time of assessment, the Income Tax Officer may demand the receipts/ agreement.
Yes, if your parents own the house you can pay them rent. This would make your parents landlord. But .they will have to declare it in their personal income tax return to prevent litigation in the future.
In case your parents don’t pay any tax or are in lower tax slab its good idea to pay them rent. This can be good strategy to save tax outgo from family.
Also Read: Best Tax Saving Investments
You cannot claim rent paid to spouse. The relationship between a husband and wife is not commercial in nature; a husband and wife are supposed to stay together. So payment of rent to a spouse will not be accepted by the income tax authorities.
If you have taken home loan for buying a house in a different city from where you are working, you are eligible to claim both HRA exemption and Home Loan Tax benefits.
Also Read: How to Generate Rent Receipts Online?
It could be that the home is at a considerable distance from your work place. Or, it could be that the home is rather small and your parents are living in it so you have to stay elsewhere on rent. You still can claim both, HRA Tax exemption and Home Loan Tax exemption – provided you are paying your rent. However, it is necessary you have some of your belongings at your home (the one you own) and you stay there on and off on during weekends and holidays.
Also Read: Submit Income Tax Proof to Employer – How, When and Why?
Despite this, if your employer does not agree and denies your tax benefits, you will have to claim it at the time of filing your tax returns.
The period in which the HRA is actually received from the employer, must necessarily pertain to the period in which the employee actually pays rent for his accommodation. In case HRA is received for a period in which no rental accommodation is occupied by the employee, exemption cannot be claimed.
If you have some other question about HRA, ask us!
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View Comments
I had taken educational loan, now I am paying recovery amount. can I claim for tax exemption.
The interest paid on education loan is eligible for tax deduction. You can get more details Tax Benefit on Education Loan (Sec 80E).
Hello Amit,
I have purchased a 1BHK Flat on my wife name but the loan against property is on my & my wife name. the EMI is deducted from my account. so the question is could I claim this ammount.
Tax benefit is only applicable to house owners. In this case the property is not in your name so you would not get benefit on home loan payment.
How to claim HRA, should I deduct eligible amount from income shown in form-16 ??
Yes you can deduct the HRA eligible amount from your starting income in Form 16.
Hi,
I am having two houses and i have a home loan for one house. WHat is the tax exemption i get?
sir
I bought new home near where i stayed for rent. The house will be handed over to me on feb16 only. Up to that i stayed in rental house. I started to pay the repayment of home loan form jan15. Is i calim both HRA & LOAN interest
Yes you claim both HRA and exemption on home loan. Once you shift in your new house you cannot claim HRA.
Hi Amit, In above case can a person not claim 1/5th amount under 24(b) untill the possession or CC in place.
The tax benefit is available only after registration/completion of property. So you cannot get any tax exemption for under construction property.
Hi Amit, Thanks for your reply. Plz clarify that if I have rent out the new house between Rs.5000 & 6000(new location, no much rent) then can I claim for both HRA & Interst paid towards housing loan..
yes you can claim both benefits easily as both are at different cities.
Hi, Am working/living in Chennai and recently purchased a house in Hyd, which is vacant now..Can I claim both HRA and Interst paid on housing loan, even if the house is vacant.
Yes if you are living on rent in Chennai then you can claim HRA. For house which is vacant in Hyderabad you can declare it as self occupied and claim deduction for home loan interest (up to Rs 2 Lakhs) and principal.
How much HRA benefit I can claim without production of a rent receipt. Will my land ladies, they are 2(house being in joint name) be required to pay Tax on the amount even if it is less then Rs.2,900/- per month?
Manmohan
you need to submit rent receipt to your employer to claim HRA irrespective of the amount. If this rent of Rs 2900 per months is their only income then they would not be paying tax as the exemption limit is Rs 2.5 Lakhs annually.
I pay 8000 rent monthly and claim 15000 .i can claim 15000 as it is least of all hra calculations . What will happen now . Will i get more monthly or my taxable income will decrease ?
Sorry I did not understand your question. But assuming that you were claiming Rs 8,000 as HRA and now you can claim Rs 15,000 then your tax would go down (*subject to certain conditions) and hence your take home would increase