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House Rent Allowance (HRA) is one of the most common tax-saving components of a salaried individual’s salary structure. It helps employees who live in rented accommodations reduce their taxable income. If you are eligible for HRA, you can claim an exemption while filing your Income Tax Return (ITR). This article will explain everything you need to know about HRA exemption, including eligibility, calculation, and how to claim it in your ITR.
HRA is a component of your salary provided by the employer to help you cover rental expenses. It is partially or fully exempted from tax under Section 10(13A) of the Income Tax Act if certain conditions are met. However, if you do not live in a rented house, the entire HRA amount becomes taxable.
To claim HRA exemption while filing your ITR, you must meet the following conditions:
Salaried Employee: You must be a salaried employee receiving HRA as part of your salary structure.
Rented Accommodation: You should be living in a rented house and paying rent to the landlord.
Rent Receipt or Agreement: You must have proof of rent payment, such as rent receipts or a rental agreement.
PAN of Landlord: If the rent paid exceeds ₹1,00,000 per annum (₹8,333 per month), you must provide the landlord’s PAN details in your ITR.
The HRA exemption is calculated as the least of the following three amounts:
Actual HRA received from your employer.
50% of your salary (basic + DA) if you live in a metro city (Delhi, Mumbai, Kolkata, Chennai) or 40% of your salary if you live in a non-metro city.
Actual rent paid minus 10% of your salary (basic + DA).
To claim HRA exemption while filing your ITR, follow these steps:
Use the HRA formula above to calculate the exemption amount you are eligible for.
Your employer will already consider HRA exemption in Form 16 if you have submitted rent receipts. Check that the exemption is correctly reflected.
When filing your Income Tax Return (ITR-1 or ITR-2):
Report your salary under 'Income from Salary' section.
Enter the exempted HRA amount under 'Allowances to the extent exempt under Section 10.
If your rent exceeds ₹1,00,000 per year, enter the PAN of your landlord while filing ITR.
If you forgot to submit rent receipts to your employer on time, you can still claim HRA exemption directly while filing your ITR. You will need to:
Calculate your eligible exemption manually.
Deduct the exempted HRA amount from your taxable salary.
Provide supporting rent receipts if required by the Income Tax Department.
No, self-employed individuals cannot claim HRA exemption under Section 10(13A) because it applies only to salaried employees. However, they can claim rent expenses under Section 80GG (subject to conditions).
Rent Receipts (with landlord’s signature and rent amount)
Rental Agreement (if applicable)
Landlord’s PAN Card (if rent exceeds ₹1,00,000 per annum)
Proof of Rent Payment (such as bank statements or rent receipts)
Not keeping rent receipts or proof of rent payments.
Claiming HRA while living in own property.
Failing to update employer with rent details.
Mismatch in rent payments and reported HRA in ITR.
Claiming HRA exemption can help you save a significant amount on taxes if you live in a rented house. Make sure you understand the eligibility criteria, calculate the exemption correctly, and provide the necessary documents to avoid issues. If you missed claiming it through your employer, you can still claim it while filing your ITR. Staying compliant with tax laws and maintaining proper records will ensure a smooth tax filing process.
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