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:
- When can you claim HRA?
- How to calculate tax exemption for HRA?
- What are proofs to be submitted for claiming HRA?
- Can HRA be claimed if you stay with parents in their house?
- Can HRA be claimed if you pay rent to spouse?
- Can HRA exemption as well as a home loan tax benefit be claimed at the same time?
- 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?
- 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:
- HRA allowance is part of the Salary package
- The employee is staying in a rented accommodation and paying rent for it
- 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
- Actual HRA Received or
- 40% (50% for metros) of Basic + Dearness Allowance or
- 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.
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!
Hello Amit,
My landlord is not providing PAN and my employer is not accepting PANNOTAVBL while declaring investment proofs. I pay tax > 1lakh/year. What can i do?
Thanks,
Rahul
As landlord is not providing PAN, you cannot do much in this case. All I can suggest is claim HRA benefit while filing Income Tax Return. In case there is scrutiny by I-T department on a later date, you should have all proofs of rent paid readily available with you.
how to include the company deducted tax in the tax calculator
Sorry we have not provided space to include TDS. You will have to do it manually.
But feedback taken will incorporate space to make entries for TDS in next version.
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
can i claim house rent for the house me n my husband live in , rent agreement is on my husbands name.is there any way to claim that ?
Kritika if the rent agreement is on husband’s name then the landlord would issue receipt on his name so you would not be able to claim HRA. The only way to claim this is to get a new agreement on your name or joint and then landlord would issue receipt accordingly.
Hi Amit,
I live in bangalore in my own apartment (Loan fully repaid and closed). Can I claim tax rebate with regard to the monthly maintenance charges paid to the apartment owners association?
Thanks
Sorry but there is no rebate on maintenance charges paid to society.
Thanks for the clarification
Hi,
I have purchased a residential site (plot) through Bank Loan. Bank has sanctioned this loan as ‘Home loan’ which is eligible to claim under section 80C and Section 24 (b) of Income-tax act. Bank also gives the “Certificate for claiming deduction u/s 80c (2)(xviii) & 24(b) of Income-tax Act, 1961” for claiming deduction. The building is not yet constructed on the site.
I am staying in a rented house & paying rent. Can i claim both HRA as well as Home loan interest?? Please advise.
Yes you can claim HRA benefit.
As the building is not complete you cannot claim tax exemption on payment of interest/principal on Home Loan.
Hi Amit,
1)I live in Bangalore and pay rent to my mother in law. I have a flat in Bangalore that is rented out and Im paying the loan – can I claim HRA, Interest on loan and Principal?
2) Since my tenant cannot claim tax exemption on maintenance – she shows the whole amount as rent, and I pay maintenance to the association directly, can I claim exemption on maintenance?
1. Yes you can claim tax benefit on both HRA & Home Loan Repayment in terms of Principal & Interest.
2. You cannot claim separate exemption on maintenance paid to society because while calculating income from rent, 30% standard deduction is already provided for repair and maintenance, irrespective of you actually spend on those.
hope it helps.
Thank you for your prompt and clear response!