HRA is a significant part of a salaried individual’s income, offering substantial tax-saving benefits under the Income Tax Act. Correctly claiming HRA can provide valuable tax reductions.
By now, most taxpayers should have received their Form 16. Employers deduct House Rent Allowance (HRA) from salaries, and this deduction can be seen in part B of Form 16 when filing an Income Tax Return (ITR). It is crucial to understand that HRA exemption under Section 10(13A) can only be claimed if one lives in a rented house. Additionally, taxpayers not receiving HRA, such as non-salaried individuals, can claim a deduction for their rental expenses under Section 80GG, subject to specified limits. Those who reside in their own house are not eligible for the HRA exemption benefit. Understanding these rules is key to avoiding the risk of claiming false HRA and potential penalties.
HRA is a significant part of a salaried individual’s income, offering substantial tax-saving benefits under the Income Tax Act. Correctly claiming HRA can provide valuable tax reductions. Here’s how to claim HRA during tax filing to maximize your tax savings.
HRA Calculation:
The exemption on HRA is calculated based on the least of the following:
- Actual HRA received.
- 50% of salary (for those living in metro cities) or 40% of salary (for non-metro residents).
- Rent paid minus 10% of the salary.
Required Documents to Claim HRA:
- Rent Receipts with acknowledgments from the landlord, along with the landlord’s PAN details if the rent exceeds Rs 1 lakh annually.
- Rental Agreement: A formal rental agreement that substantiates your claim.
While these documents do not need to be uploaded, they should be readily available in case of an enquiry by the authorities. False HRA claims can lead to penalties, so it’s crucial to be cautious and aware of the consequences.
Also Read : ITR Filing 2024: Seven Types Of ITR Forms Suitable For Various Taxpayers
“If the assessing officer determines that a person has underreported their income, a penalty of 50% of the tax due on the underreported income is levied. Further, a penalty of up to 3 times (300%) the amount of tax sought to be evaded by concealing income will also be levied,” said Sudhakar Sethuraman, Partner at Deloitte.
Correctly claiming HRA is not just a legal requirement but also a valuable tax-saving tool for salaried taxpayers. It can significantly reduce your taxable income, thereby optimizing your tax returns. Staying informed about current tax laws can help you utilize this tool effectively to maximize your tax savings.
