Everything You Need To Know About House Rent Allowance Exemption

The House Rent Allowance (HRA) exemption is a tax benefit available to salaried individuals to assist with their rental accommodation expenses . This exemption helps lower taxable income , thereby reducing the overall tax liability.

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The HRA exemption you can claim is the smallest of the following amounts:

• Actual HRA received: The HRA amount specified in your salary slip.
• Rent Paid minus 10% of salary: This calculates your actual rent expenditure minus 10% of your salary.

HRA limit based on city type:

• 50% of your basic salary plus dearness allowance (DA) for metro cities (Delhi, Mumbai, Kolkata, Chennai).
• 40% of your basic salary plus DA for non-metro cities.
• Documents Required for HRA Deduction on Income Tax Return ( ITR )

Depending on the circumstances, you may need the following documents to claim an HRA deduction:

• Rent Agreement: A valid rent agreement for the current financial year, serving as proof of rental accommodation.
• Rent Receipts: Properly stamped receipts for the rent paid each month. Even if rent is paid electronically, having receipts is crucial.
• Landlord’s PAN Card: If the total rent paid exceeds Rs 1 lakh in a year, you must submit a copy of your landlord’s PAN card to your employer.
• Proof of Payment: Bank statements, online transaction receipts, or other evidence showing actual rent payment.
• Rent to Family Members: Paying rent to family members is allowed under tax laws, but maintaining proper documentation is essential. If filing an ITR is required for the family member, they should declare the rent received as income in their tax return.
• Employee Declaration Form: As a salaried employee, you might need to fill out a declaration form with details about the rented accommodation and the rent paid to claim an HRA exemption.

These documents are usually required by your employer to deduct HRA and reflect it in your Form 16. However, you can still claim HRA when filing your ITR, even if you didn’t claim it earlier.

This information provides a general understanding of HRA exemption. For specific details and the latest regulations, consulting a tax advisor is recommended.