HRA Exemption Rule: If the annual rent is more than one lakh rupees, then the PAN number of the landlord will have to be given for income tax exemption. Along with this, the Rent Agreement will also have to be submitted to the Income Tax Department. When you give the PAN card of the landlord, the amount of rent will be added to the income of the landlord.
Some live on rent, some live in their parents’ house, some have home loan. But everyone’s tension is the same. March 31 is near. How to save income tax? Today we will give you complete information about HRA exemption in income tax. After which you yourself will be able to easily calculate what is the rule regarding HRA in income tax, and how to take full advantage of it?
First of all tell you in simple language what is this HRA? House Rent Allowance (HRA) is an allowance, which is given by the employer to its employees in the form of house rent. Almost all private-government employees get HRA. It is a part of CTC itself. But HRA comes under the purview of tax exemption, which benefits the employees. HRA can be exempted under Section 10(13A) of the Income Tax Act. Only basic salary and dearness allowance (DA) are added to the salary for HRA claim.
No-PAN card for rent up to Rs 1 lakh
If you live on rent and pay rent up to Rs 1 lakh annually, you can claim up to Rs 1 lakh by submitting the rent receipt. But if the annual rent is more than one lakh rupees, then the PAN number of the landlord will have to be given for income tax exemption. Along with this, the Rent Agreement will also have to be submitted to the Income Tax Department. When you give the PAN card of the landlord, the amount of rent will be added to the income of the landlord. Then it will be taxed as per the rules.
Let us tell you, almost companies ask employees to submit rent receipts before the end of every financial year. Minimum HRA received from the company employing the employee, or 50% of basic pay for employees living in metros (Delhi, Mumbai, Kolkata, Chennai) (40% elsewhere) or 10% of basic pay in actual rent paid After deducting the remaining amount can be claimed as HRA.
HRA calculation formula
Suppose your basic salary is Rs 40,000 per month and you live in Delhi by paying Rs 15,000 per month as rent. While the company gives you HRA of around Rs 17,000 every month. Then how will you get tax benefits, the math is something like this.
HRA= Rs 17,000
Actual rent paid after deducting 10% of Basic Salary = Rs 15,000 – Rs 4,000 = Rs 11,000
50% of Basic Salary = Rs 20,000
With this formula, HRA will be Rs 11,000 and tax will have to be paid on the rest.
If you have taken a home loan then this formula
If you have taken a home, then how will you get the benefit of income tax exemption? If the home loan is running, then under section 80c of income tax, you can claim deduction for principal payment up to Rs 1.5 lakh. Apart from this, additional tax exemption of up to Rs 2 lakh is also available under section 24B on the interest paid on the home loan. This means that a total of Rs 3.5 lakh can be availed of tax benefits.
On the other hand, if the home loan is taken jointly, both husband and wife, or if there are two brothers, can avail separate tax exemptions. For this, the taxpayer will have to tell about the loan and its interest payment in the Income Tax Return. As a proof, interest letter from the concerned bank will have to be submitted.
Tax saving formula while living at parents house
On the other hand, if you live in your parents’ house, you can save tax by paying rent to them every month. The condition is that they should actually be given rent, and inform the Income Tax Department about it. If the rent paid is more than Rs 1 lakh per annum, then the PAN number of the parents will have to be filled in the form to avail income tax exemption.
Along with this, the rent agreement will also have to be attached. After this, the amount of rent is added to the income of the parents. If the parents do not have any other income, then no tax will have to be paid on this income. In this way, you can take full advantage of HRA while living with your parents.
