8 Questions about Tax Exemption on HRA

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

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

How to calculate tax exemption for HRA?

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

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

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

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.

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.

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

1. I work and stay at a rented flat in Gurgaon. My Family lives in Kolkata and I pay rent for them too. The rent paid for Kolkata is 3 times than of Gurgaon. Can I claim HRA Exemption for Kolkata Rental Agreement instead of Gurgaon Rental Agreement?

2. I GET SALARY FOR RS.29850/- PER MONTH ( CONSOLIDATE) THERE IS NO MENTION OF DA HRA & OTHER ELEMENTS. I STAY IN RENTED HOUSE AT HOWRAH. MAY I GET HRA EXEMPTION ?
IF YES KINDLY SEND US THE CALCULATION OF HRA EXEMPTION

3. Hello sir
What is the HRA rule for suborniate officers for paramilitary force having grade pay Rs 4600. Is any provision he can take rented accommodation for his dependent family any city in india.please mention DOPT rule

4. I have taken loan and brought House and let out it.
Can I authorise my mother to collect rent for her maintain ?
Can I claim rebate of Interest on House in my Salary income?

5. [email protected]
I am serving in a hospital and management has provided me rent free staff quarters because I have to attend emergency calls. My question is wether I am eligible for house rent allowance? Or not ? Please let me know at your earliest.

6. Lalmohan Patnaik

Dear Sir,
I am a retired person now and getting pension. My pension amount is Rs.31500/- p.m. after commutation. Though, I am having a house, which is in a distant place from the city, and I am staying in rent even after retirement for my son’s education facility. I have taken a home loan, which is still continuing. Kindly advise me whether, I am eligible for tax exemption on HRA and also the tax exemption on Housing Loan( Both interest and principal). Presently I am paying an amount of Rs.15,000/- as rent. Please send me the reply in my mail.
Thanks and regards.

7. I have 1500rs H R A allownce in my monthly sallary& my basic is 15000 rs as well d.a is 20000rs approximately total annual income by sallary is 500000rs only.I paid hra 24000 per year but i dont have any hra recipt by landlord cause house in village area & he dont submit incometax return as well dont have pan no in that condition can i claim HRA deduction in my it return.

8. Is there any home improvement loan? Can I take interest paid on this loan for it exemption in addition to home loan exemption of RS 2 lakh pl clarify

1. The home improvement loan tax exemption is within the Rs 2 lakh limit of “loss from house income”

9. I havealready taken home loan in 2015 and getting exemption of tax for 2 lakh on interest paid on home loan my question is can I take home furnishing loan for the same house and can I get tax exemption of RS 30000 on interest paid on home furnishing loan as you mentioned in addition to the above RS 2 lakh exemption? Pl clarify with authority and applicable sections and interpretations

1. The home improvement loan interest exemption is part of Rs 2 lakh limit. Both are covered under section 24

10. i have 2 houses and one is given to my in laws and i take a very small amount as rent and other one is vacant i pay 120015 as interest on loan for the current FY

which is better for me from tax point of view claim interest straight away or claim loss on propert

1. As you have two houses – you will have to show rent received on atleast one house. The net loss/gain on property would be total rent received*70% – Interest paid

11. Can I take rebate on interest paid on home loan during Project under construction as Project will be completed next year