Post-2013, for employees earning more than 1 lakh per annum, the landlord’s PAN details need to be provided by the employee in order to avail HRA exemption. When an employee claims HRA without submitting the required documents and the declaration, he/she becomes ineligible for tax exemption and the amount of HRA is included in the individual’s income and the income tax slab is revised accordingly.
HRA or house rental allowance is the amount paid by the salaried/ self-employed individuals for renting an accomodation. Tax exemption due to HRA for salaried taxpayers is calculated under section 10(13A) of income tax act and for self-employed individuals, the tax deductions based on HRA are calculated based on section 80GG of Income Tax Act.
Documents required to claim HRA Exemption
The exemption in tax from HRA is calculated as the least of:
Here’s an example to understand how HRA is calculated
Rules for Claiming HRA
If you wish to claim HRA, the following rules are applicable:
Actual HRA received
50% of basic salary+DA, for the people residing in metro cities and 40% of basic salary+DA for non-residents of metro cities
Excess of rent paid annually is more than 10% of the salary
What are the benefits of HRA?
It reduces the total taxable income, which ultimately reduces the amount of tax that a person is liable to pay to the Income Tax Department