HRA exemption new update: HRA exemption will be available only in respect of the residential house taken by you on rent. In such a situation, you will be able to claim HRA only on the basis of rent paid for your house.
House Rent Allowance: Sachin Patel lives in a rented house in Mumbai. His parents live in another rented house in Ahmedabad. He is paying the rent for both the houses. He has the rent agreement and rent receipts of both the houses. In such a situation, their question is whether House Rent Allowance (HRA) can be claimed on the rent of more than one property? It is possible that your question may also be similar to Sacheen’s. If yes then this news is useful for you.
Special allowance is received from the employer
HRA exemption is available under Section 10(13A) of the Income Tax Act. Further, Rule 2A of the Income Tax Act prescribes the conditions to be satisfied to claim HRA exemption. One of the conditions laid down in Rule 2A is that the allowance should be specifically paid to the employee by his employer to meet the expenditure actually incurred on payment of rent in respect of a residential house occupied by the taxpayer.
Discount will be available on residential houses
HRA exemption will be available only in respect of the residential house rented by you. In such a situation, you will be able to claim HRA only on the basis of rent paid for your house. Even if you pay rent for your parents’ house, you will not be able to claim HRA on it. There is also a limit on the amount of HRA you can claim. Under this, you can claim a maximum of 50 percent of your basic salary.
Understand this with example
For example, if your basic pay is Rs 50,000 per month and you get HRA of Rs 20,000 per month. But you pay Rs 30,000 every month as rent. So your HRA exemption will be Rs 20,000 per month and Rs 2.4 lakh annually for each financial year. It is important to note here that HRA exemption is a deduction from your taxable income. That means, the lower your taxable income, the lower your income tax liability.
If you are claiming HRA for more than one property, the Income Tax Department can scrutinize your claim. Therefore, claim HRA as per rules. It is important to maintain proper documentation and ensure that you are eligible to claim HRA for both the properties. You should submit to your employer the rent agreement of both the properties, rent receipts of both the properties as well as a declaration from your employer stating that you have not claimed HRA simultaneously for both the properties.
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