House Rent Allowance Update: If you do a job then you must be getting the benefit of House Rent Allowance. This is an important part of the salary, which is very useful in saving tax. If these 3 mistakes are made then the benefit of deduction on HRA will be withdrawn and hefty tax will have to be deposited.
House Rent Allowance: If you do a job, then you must know about the House Rent Allowance and are also taking advantage of it. This is an important part of your salary which is available in the form of allowance. Salaried Individuals have to claim HRA. You get tax benefit on house rent allowance. If you do not live in a rented house, then you will have to pay tax on this allowance. The benefit of deduction is available on HRA under section 10(13A) of the Income Tax Act. There is no limit to this. How much deduction will be available on HRA depends on your salary and HRA amount received from the employer.
Avoid the 3 mistakes below
Tax expert Chirag Chauhan of CA Chauhan & Co Chartered Accountants said that it often happens that salaried individuals make three big mistakes while claiming HRA, due to which they get into trouble later. Avoid these mistakes.
Make sure to make a rent agreement
If you live by paying rent in the house which is in the name of your relative or family member, then you will get the benefit of house rent allowance. Many times it happens that due to the relative’s house, the rent agreement is not made. If your employer or tax department catches your eye, then the benefit of HRA deduction will be withdrawn. In this case, you will have to pay tax on this amount.
Transfer Online or Chequebook
If you live in a rented house, then transfer money from your account to the landlord’s bank account only. Rent should not be paid in cash. If you pay more than Rs 5000 in cash, then it is necessary to put revenue stamp on every receipt. If you pay rent up to Rs 1 lakh in a financial year, then PAN of the landlord is not required. PAN number will have to be shared if the rent is paid more than that.
Must take rent receipt
When you deposit the rent, then definitely get the rent receipt from the landlord. Your employer can prepare on the rent receipt. If this matter reaches the tax department, it will not accept the rent receipt. The tax department asks for more evidence. In many cases, the tenant pays more rent than the rent agreement. It is possible that in such cases the tenant deposits additional amount in cash. In this situation, the benefit of deduction will be available only on the amount for which you have the rent receipt.
How is tax exemption on HRA calculated?
>> How much HRA is given by the employer.
>> If you live in metro cities then 50 percent of basic salary and dearness allowance.
>> If you live in non-metro cities, then 40 percent of basic salary and dearness allowance.
>> The amount of rent you have paid should be less than 10 percent of the basic salary and dearness allowance.
The least amount in the above four conditions will be exempted from tax.
