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.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 employmentso 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 suchas the rented residence address, rent
paid, name of the person who has paid the rent. WhileHRA 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-TAct, 1961, as they do not earn a salary
* For claiming the HRA exemption, the employeemust 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 rentreceived
* The employee will have to submit the rent receipt/rent agreement to the employer for availing the HRA exemption
Thanks to
Shri. P. N. Yedage,
IP (Mails), Circle office,
Maharashtra Circle,
Mumbai-400001.
