House rent allowance (HRA) is a part of the salary that the employer provides to his employees to cover the rent expenses. It can be helpful in saving tax for those who live on rent. If you are looking for ways to save tax through HRA deduction, understand the important aspects of HRA and know how you can claim its tax benefits.
Also Read– These banks offer above 9% FD interest rate to senior citizens
Eligibility conditions to claim tax deduction on HRA:
Tax deduction on a part of HRA can be availed under section 10 (13A) of the Income Tax Act if you fulfil the following conditions:
- You are a salaried person.
- You receive HRA as a part of salary.
- You live in a rented house.
- You actually pay the rent of the house, i.e. the rent receipt should be in your name.
Tax deduction on HRA can be claimed as per any one of the following:
- The amount obtained by deducting 10% of the actual rent paid by you from your basic salary.
- The actual HRA paid by your employer.
- 50% of your salary if your residence is in Mumbai, Delhi, Chennai or Kolkata and 40% in other places.
Note: Salary includes basic salary, dearness allowance (DA) and other commissions, which are applicable in the calculation of HRA.
Read More: Business Credit Cards: What are the key differences from personal credit cards?
Important points while claiming HRA deduction:
If you pay rent of more than Rs 1 lakh in a year, the landlord’s PAN number will be required to claim HRA exemption. If the landlord does not have a PAN, you will have to submit a signed declaration. If none of these is available, you cannot get the benefit of tax deduction.
HRA varies from city to city. If you live in Mumbai, Delhi, Chennai or Kolkata, you can claim up to 50% of HRA as tax deduction, while in other places it is 40%.
Since HRA is given to cover rented living expenses, you cannot claim it if you are living in your own house.
If you are living with your parents and submit rent receipts in their name, you can claim HRA exemption. But your parents will have to include the same rental income in their income tax returns.
If you pay your spouse’s rent, you cannot claim HRA deduction on it.
Section 80GG – How to save tax if you don’t get HRA
If you live in a rented house but don’t receive House Rent Allowance (HRA), or if you are self-employed and don’t have a salary, you can still save on taxes! You can claim a deduction under Section 80GG of the Income Tax Act.
How much can you claim?
Under Section 80GG, you can claim the following deductions:
Up to Rs 5,000 per month (which totals Rs 60,000 per year)
25% of your gross total income
Actual rent paid minus 10% of your total income
Read More: What is film insurance? Here’s what you need to know if you’re producing a movie
This means you can choose the option that gives you the highest deduction to reduce your taxable income.
For more news like this visit Officenewz.com
