House Rent Allowances – HRA – Tax deductions & Exemptions
Table of Contents
House Rent Allowances – HRA
HRA – House Rent Allowances is a component of salary towards rent paid by salaried individuals and tax deduction is allowed on the payment made. In case not rent is paid by the salaried person, then no deduction is allowed under this head.
How HRA is calculated?
HRA is calculated as least of the followings:
- Actual HRA received from the employer.
- 50% of Basic + DA for a person living in the metro city, other 40% of salary (Basic + DA) is allowed.
- Excess of rent paid over 10% of salary (ie Basic + DA).
Example of HRA calculation
Mr. A resides in Delhi with the following details for the year
- Basic Salary for the year 3,00,000/-
- DA of Rs 60,000/-
- Rent paid 1,80,000/-
- HRA received from employer of Rs 1,20,000/-
Calculation of HRA exemption is as follows:
| HRA received | 1,20,000/- |
| 50 % of Basic + DA ( 3,00,000/- + 60,000/- as accommodation is in Delhi, a metro city | 1,80,000/- |
| Rent paid 1,80,000/- less 10% of Basic + DA ie 10% of Rs 3,60,000/- | 1,44,000/- |
| The lowest of the above is allowed as an exemption | 1,20,000/- |
Is rent receipt compulsory?
A person claiming exemptions under HRA should submit proof of rent receipts duly issued and signed by the landlord.
Is the PAN number of landlords is compulsory?
The person has to submit the PAN number of the landlord if the amount exceeds Rs 1 Lakhs ie. monthly rent payment exceeds Rs 8,333/-. In case of rent payment exceeding the threshold, limit and the employee does not provide the PAN of the landlord, then the exemption will not be allowed.
Will I get both HRA Exemption and deductions on Home loan interest and principal re-payment?
Yes, both HRA and repayment of principal components & Interest on housing loan is allowed.
How can I claim HRA exemption?
There 2 options for claiming HRA exemptions (1) Submit proof of rent payment to employer so that employer consider the HRA exemption in form 16 or (2) Claim HRA exemption at the time of filing income tax return.
Also read
- Deductions u/s 80C
- Income Tax Slab FY 2021-22
- SECTION 192 – TDS ON SALARY(
- Section 194I – TDS on Rent – Income Tax
- Section 194IB – TDS on Rent
- Best Ways to Save Tax for Salaried Individuals
