HRA claim in income tax
A quick summary of HRA in income tax
In this post, we’ll briefly explain how to claim HRA in your income tax. We will then explore the following topics in more detail:
- What is House Rent Allowance or HRA?
- Tax Benefits on both Home Loan and Rented Residence
- Documents Required to Claim Tax Exemption on HRA
- Eligibility Criteria to Claim Tax Deductions on HRA
- How to Claim HRA when living with Parents?
- HRA Tax Exemptions on the Rent Paid under Section 80 GG
- How to claim rent under section 80 GG?
- Date for Filing the ITR and Claiming the HRA Tax Exemption
- Things to Consider when making HRA Deductions
What is House Rent Allowance or HRA?
HRA, which stands for House Rent Allowance, is like a part of your employee’s salary that gets taxed. This allowance is given to help employees with the cost of living in a rented place.
HRA isn’t just about making it easier for employees to handle their rented home expenses. It can also lower the amount of tax they need to pay. In the following sections, we’ll talk about who can benefit from this tax advantage and how they determine its worth.
Tax Benefits on both Home Loan and Rented Residence
If an employee rents out their own house but lives in a rented place, they can get tax benefits for both the rent they pay and the home loan. In this situation, the employee must declare the income they earn from their property (for which they got the home loan) and pay the relevant taxes.
Important note: If the rented and owned properties are in the same city, the employee can’t claim HRA tax benefits for both. To get the tax advantage for HRA, the employee has to demonstrate that their property is far away from their workplace and unsuitable for residential use. This way, they can qualify for HRA tax exemption.
Documents Required to Claim Tax Exemption on HRA
To make use of tax breaks for House Rent Allowance (HRA), the employee should give in some documents:
If the rent paid in a year is more than Rs. 1 Lakh, the employee needs to submit the PAN card of the landlord and the rental agreement to get HRA tax benefits.
If rent receipt is submitted then the receipts should have details like:
- Date and name of the landlord
- Employee’s name
- Landlord’s PAN
- Address of the rented place
- How long did the employee stay there
- A little stamp that shows the payment is accurate (revenue stamp)
- Landlord’s signature on that stamp
- Each receipt can be used for three months, so you’ll need at least 4 of them for a year.
Also, if employees pay their parent’s house rent, they can still get tax breaks for House Rent Allowance (HRA).
Eligibility Criteria to Claim Tax Deductions On HRA
To get tax deductions for HRA under Section 10 (13A) of the Income Tax Act, you should meet these conditions:
- You must be earning a salary to claim HRA deductions.
- The place where you’re living must be rented. HRA calculations are based on the rent you pay..
- You’ll need a receipt for house rent or some other proof of your rented home to claim HRA deductions.
How to Claim HRA When Living with Parents?
- Make an Agreement: Create a paper that says you’re renting a part of your parent’s house. It should also show how much rent you’re giving them.
- Get Receipts: Ask your parents for paper proof of the rent you’re paying. The receipts should include the amount paid, the time it was paid, and your parents’ name, address, and signature.
- Pay Smart: Try to pay the rent using the bank or checks, not cash. This way, you can show you paid it if needed.
- Own the House: Make sure your parents own the house. They should have papers like house deeds or tax receipts to prove it’s their house.
- Your Own Space: If you’re using a separate part of the house, make sure it’s like your own space. It should have its door, a kitchen you use, and things showing where you live.
- Ask Your Boss: Ask your employer about their specific limitations for claiming HRA while living with your parents. Some companies may request extra paperwork or documents.
- Show the Proof: In case of tax scrutiny, show them the agreement, rent receipts, and other papers. Keep the actual documents safe with you.
HRA Tax Exemptions on the Rent Paid Under Section 80 GG
Section 80GG in the Income Tax Act lets you save taxes on the rent you pay for your house. If you’re self-employed or don’t get a House Rent Allowance, you can still get tax benefits for paying house rent using Section 80GG.
How to claim rent under section 80 GG?
To get a deduction under Section 80GG of the ITA, 1961 in India – which is for people without HRA – follow these steps:
- It would help if you were an individual taxpayer, self-employed or a salaried worker without HRA.
- You and your spouse or minor child should not own a home where you live or work.
- Calculate Deduction:
- The Deduction is the lowest rent paid minus 10% of your income, ₹5,000 per month, or 25% of your total income.
- Collect Documents:
- Get rent receipts from your landlord for the money you paid during the year.
- Keep a copy of your rental agreement.
- Make a declaration (Form 10BA) stating you meet the conditions.
- File Your Tax Return:
- Add the deduction amount from Step 2 to your tax return.
- Attach the documents like Form 10BA and rent receipts.
- Submit your tax return by the due date set by the Income Tax Department.
Remember, you can’t use this Deduction if you live with your parents.
Date for Filing the ITR and Claiming the HRA Tax Exemption
If you work for a salary and want to get tax breaks for HRA, you must file your Income Tax Returns (ITR) by July 31 of the financial year.
For those who are self employed:
- If you don’t need an income audit, you also have until July 31.
- If you need an audit, the deadline is September 30.
Things to Consider When Making HRA Deductions
Here’s what you should know about HRA tax benefits:
- If you’re paying rent to your spouse, you can’t claim HRA tax benefits.
- You can still get HRA tax breaks even if you have a home loan.
- You can claim HRA if you live with your parents and pay rent, but make sure you get a receipt.
- If you earn more than ₹1 lakh a year, you must share your landlord’s PAN details.
- If your landlord lives abroad (NRI), 30% of your rent needs to be withheld as TDS before you pay them.
1. When can I get tax benefits for HRA?
Ans, You can claim tax benefits for the house rent allowance if you’re an employee and don’t own a house in the city where you work.
2. Who can get HRA tax benefits?
- Don’t get any house rent allowance (HRA) from their employer.
- Rented a house for residential purpose.
3. Which part of income tax covers HRA?
Ans, Section 10(13) of the Income Tax Act covers HRA.
4. I work for myself. Can I get an HRA tax benefit?
Ans, You can’t get HRA tax benefits if you’re self-employed. But you can deduct the rent you pay for your home using Section 80GG of the Income Tax Act.