8 Questions about Tax Exemption on HRA

Tax Benefit on HRA - House Rent Allowance
Tax Benefit on HRA – House Rent Allowance

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:

  1. When can you claim HRA?
  2. How to calculate tax exemption for HRA?
  3. What are proofs to be submitted for claiming HRA?
  4. Can HRA be claimed if you stay with parents in their house?
  5. Can HRA be claimed if you pay rent to spouse?
  6. Can HRA exemption as well as a home loan tax benefit be claimed at the same time?
  7. What if you have taken home loan and have bought a home in the same city but are not residing in it for genuine reasons?
  8. Period in which HRA exemption can be claimed

Read on…

When can you claim HRA?

Any salaried employee can claim HRA if they satisfy the following condition:

  1. HRA allowance is part of the Salary package
  2. The employee is staying in a rented accommodation and paying rent for it
  3. The rent paid exceeds 10% of the salary

Also Read: How to Claim HRA Tax Exemptions while filing Income Tax Return?

How to calculate tax exemption for HRA?

The maximum HRA that can be claimed for tax exemption is minimum of

  1. Actual HRA Received or
  2. 40% (50% for metros) of Basic + Dearness Allowance or
  3. Rent paid (-) 10% of (Basic + Dearness Allowance)

[button link=”https://apnaplan.files.wordpress.com/2018/02/hra-tax-exemption-calculator.xlsx” size=”large” style=”download” color=”darkcyan” text=”light”] Download HRA Tax Exemption Calculator (44.06 KB)[/button]

The HRA calculation has been explained by an example:

Assumptions

  • HRA per month = Rs 15,000
  • Basic monthly salary = Rs 30,000
  • Dearness Allowance = Nil
  • Monthly rent = Rs 12,000
  • Rental accommodation is in Mumbai (which is metro)

HRA Exemption Calculation:

  • Actual amount of HRA = Rs 15,000
  • 50% of salary = 50% x (30,000 + 0) = Rs 15,000
  • Actual rent paid – 10% of salary = Rs 12,000 – [10% of (30,000 + 0)] = 12,000 – 3,000 = Rs 9,000

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.

What are proofs to be submitted for claiming HRA?

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.

Also Read: Can I claim Tax Benefit on both HRA & Home Loan?

Can HRA be claimed if you stay with parents in their house?

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

Can HRA be claimed if you pay rent to spouse?

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.

Can HRA exemption as well as a home loan tax benefit be claimed at the same time?

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?

What if you have taken home loan and have bought a home in the same city but are not residing in it for genuine reasons?

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.

Period in which HRA exemption can be claimed

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!

113 thoughts on “8 Questions about Tax Exemption on HRA”

  1. Hi Amit,

    House Property & Loan Details:
    • Bought a constructed house and is registered under my name only.
    • Joint Housing Loan taken by me & My Spouse.

    Section-24
    1. How to claim Tax exemption for Interest paid on Housing Loan by me & my spouse as well?

    80C
    2. Is my Spouse eligible to claim exemption on the Principal amount paid on Housing Loan?
    3. I noted that Stamp Duty & Registration charges could be claimed under 80C. We have spent around 3.0Lacs for the same. Is it possible for both of us (I & my Spouse) to claim exemption by splitting the amount (1.5L + 1.5 L)

    80D / 80DDB
    4. Is it possible to claim the amount spent on complete Blood test for the dependent in Bio-Lab as Preventive Health-check up? If possible please share the limit.
    5. Is it possible to claim the amount spent on Dental Treatment – Root Canal / Crowning? If possible please share the limit.

    Thanks & Regards

    1. The Tax exemption under Sec 24 can only be claimed the person on whose name the house is registered. So in your case your spouse cannot claim any tax benefit on this house. The above statement is true for all sections of income tax exemption. So no tax benefit for your spouse u/s 80C as well.

      u/s 80D you can claim up to Rs 5,000 for preventive health checkup for you and your dependents. I am not sure if Blood test as stated by you can be claimed as preventive health checkup … because as per definition it should not be done for curing any disease.

      Root Canal would not qualify for deduction u/s 80DDB as this covers life threatening/ serious conditions like AIDS, Chronic renal failure, etc

  2. Hi,

    I share apartment for rent with my friends. I pay Rs 4k as rent which is part of my share.
    My basic is Rs 40k. There is HRA component in my salary.
    So if I calculate HRA tax exemption it comes Rs4k – (10% of 40k) = Rs 0

    Whether I am not eligible to claim tax exemption for the rent I pay?

  3. Hi ,
    I m working as resident doctor in jodhpur. Govt give me payment in two part one is salary & other is stayfund. There is no mention of HRA in payment .I live in on rent house in JODHPUR (RAJASTHAN) .Can I claim for HRA in INCOMETAX return.Please guide me.

    Thanks

    1. If HRA is not mentioned in your Appointment letter of Salary slip then you would not be able to take tax benefit for HRA. But you claim exemption for House Rent up to Rs 2,000 u/s 80GG. The House Rent deduction u/s 80GG is minimum of the 3 numbers:
      Rs. 2,000 per month
      25% of annual income
      (Rent Paid – 10% of Annual Income)

  4. I have changed my rented flat in July-13 and paying 20K as rent and have PAN card of landlord.
    So no prob for the period of Jul-13 to Mar-14.

    BUT for the period Apr-13 to Jun-13 I was living in another flat where i was paying 14.5 K
    I was not aware of the rule till now.
    I thought for those 3 months no PAN card is required.
    What should i do now.
    Previous landlord has denied to give details of PAN card.

    How should I proceed for HRA exemption ??

  5. Anil Kumar Sinha

    I am paying EMI Rs24552 towards home loan (Rs21L) taken in July2012. The interest limit on home loan has been increased from 1.5L to 2.5L in the Feb2013. In order to maximise the rebate what should be done during 2013-14, please suggest.

  6. Hi Amit,

    Thank you for the clarification. I’m paying 8000 per month towards rent but I’m not taking any kind of receipt from my landlord. I’m paying in cash. When I’m submitting my Proof of investment I’m asking the landlord to sign on the receipt provided by the employer.

    Is there any way can I take monthly receipt from the landlord?

    Thank you
    Kishore

    1. Yes you can tell your landlord to give you rent slip. Its your right!

      If you are looking for rent slip formats just search for it on google and you would get plenty of them. Just print them and tell your landlord to fill it up and sign it as rent receipt.

  7. I am a salaried person. I get HRA (Rs.7000/-) and I pay Rs.8000/- as house rent. I reside about 35 kms away from my work place and commute daily. I own a house property which is about 45 kms from my work place (i reside in a different city because of family compulsions).My house property is rented out. My question is- 1) Will I get exemption u/s 10(13A) (2) Can I claim rebate on interest paid on loan to acquire house property even if I claim exemption as in (1) above.(3) Can I claim rebate u/s 80 C on principal paid even if I am claiming exemption as in (1) above.

  8. I was recently transferred from Chandigarh to Delhi. My wife and children are still in Chandigarh due to schooling of my children. In Chandigarh I am paying rent of 15000/- per month and in Delhi I have taken a small 1BHK flat for 4500/- per month rent. Can I claim Chandigarh rent in HRA deduction instead of Delhi rent . My basic Salary is 25000 and HRA from employer is 12500.

    1. You won’t be able to claim HRA on Chandigarh flat as HRA is given to you to stay in city of work.
      You would only be able to claim HRA benefit on rented flat in Delhi.

  9. I am paying Rs. 10000 as rent and Rs. 2500/- as maintenance charges. While computing tax exemption on HRA, whether rent and maintenance charges, both will be taken into account or only rent.

  10. hiii…
    I have our own house on my husband name. i have submitted rent receipt to my employer for tax exemption. The rent receipt is signed by my husband, as it shows that i m living in a rented house.
    Is there will be any verification for the same? shall i continue this in fiuture?
    Please clarify.

    1. Hi Ranjana

      The responsibility of verification of HRA claims lies with the employers. They generally do some random checks and if caught may cost your job. You should understand this risk and know what you are doing is not right. To continue this or not is your decision but I would personally not recommend it.

  11. I am working in nationalise bank as a clerk if bank give me appointment in other then my native where housing loan is availed. them i am eligible for the hra exemption.

  12. Hi Amit,

    I am Staying in Mumbai, and my parents are staying in Ranchi (Own house) but due to some personal reason i have to pay some rent to him. So can i claim that amount for HRA exemption.

    and in Future i am also planning to buy house in my native place.i.e patna so in that case will i can claim benefit for intrest paid for house loan + rent paid to parents.

    Is it very mandatory to have rent agreement for HRA exemption as in my organization we have sumbitted rent slip but they have not accepted that and asking for rent agrrement which i dont have so can i claim that HRA amount while filling ITR and if yes what i document i need to sumbit.

    Thanks in Adnance
    Regards

    1. Hi Atul

      You can claim HRA only for one house and house should be the one you stay in and in and around your workplace. So you won’t get advantage of HRA for rent you pay for your parents.

      Submission of Rent Agreement is not compulsary but it depends on company to company. For most of companies Rent slip is enough while other insists on rent agreement. You don’t have much option but to get rent agreement done in case you want to claim HRA from your company.

      When you buy house in Patna, you would be able to claim your HRA and tax advantage on Home loan too.

  13. I am working in bangalore, buought new appartment in bangalore and having Home loan for that appartment. My Parents are staying in other city/state. Is it possible to claim both home loan of mine (bangalore) and HRA for my parents (other than my current city)?

    Thanks in advance.

  14. Hi,

    I am staying in an apartment paying Rs. X towards rent to owner and Rs. Y towards monthly maintenance to apartment association. Can I claim for HRA exemption for Rs. X+Y or Rs. X only?

    1. No only Delhi, Chennai, Kolkatta and Mumbai are considered as metro for HRA Tax exemption.

      But I think its high time Govt. starts considering Gurgaon, Noida, Thane etc part of Metro for HRA. The rents are similar to metros in these places.

  15. I am working as a contractor wherein in Form 16, i got the lumpsum amount as a compensation. How can i file the HRA since I am living into the rented apartment and I don’t own any home in the residing city.

    1. Consultants cannot claim HRA because they don’t receive any salary and hence there is no HRA component in your compensation.

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