HRA Rule: If you live on rent and pay rent up to Rs 1 lakh annually, then you can claim up to Rs 1 lakh by submitting the rent receipt. But if the annual rent is more than Rs 1 lakh, then the PAN number of the landlord will have to be given for income tax exemption.
How to save income tax? Most of the working people are worried about this thing. Because as March 31 approaches, people start fighting to save tax. Today we are telling you an easy idea by which you can save income tax.
Actually, if you live on rent, or with your parents in their house. You can avail income tax exemption in both the cases. For this, first of all you should know about HRA exemption in income tax.
So first of all let us tell you what is this HRA? House Rent Allowance (HRA) is an allowance which the employer gives to its employees as house rent. Almost all private-government employees get HRA. This is a part of CTC. The good thing is that HRA comes under the ambit of tax exemption, the benefits of which are available to the employees. HRA exemption can be taken 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 on fare up to Rs 1 lakh
If you live on rent and pay rent up to Rs 1 lakh annually, then you can claim up to Rs 1 lakh by submitting the rent receipt. But if the annual rent is more than Rs 1 lakh, then the PAN number of the landlord will have to be given for income tax exemption. Besides, the rent agreement will also have to be submitted to the Income Tax Department. When you give the PAN number of the landlord, the rent amount will be added to the landlord’s income, then the landlord will have to pay tax on it as per the rules.
Let us tell you, almost companies ask their employees to submit rent receipts before the end of every financial year. Minimum HRA received from the company employing the employee, or 50% of the basic salary for employees residing in metros (Delhi, Mumbai, Kolkata, Chennai) (40% elsewhere) or 10% of the basic salary in actual rent paid After deduction, the remaining amount can be claimed as HRA.
HRA calculation formula
Suppose your basic salary is Rs 40,000 per month and you live on rent in Delhi, whose monthly rent is Rs 15,000. The company gives you HRA of around Rs 17,000 every month. Then how will you get tax benefits, the mathematics is something like this. For this, there are three proposed rules from the Income Tax Department, under these three rules, the fare which is lowest is considered as HRA exemption. Let us understand with example…
HRA = Rs 17,000
Actual rental payment remaining 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 are running a home loan, then you can claim deduction for the principal payment up to Rs 1.5 lakh under Section 80C of Income Tax. Apart from this, additional tax exemption up to Rs 2 lakh is also available under Section 24B on the interest paid on home loan. This means that you can avail total tax benefits up to Rs 3.5 lakh. On the other hand, if the home loan is taken jointly, then if there is a husband, wife or two brothers, then both can avail the benefit of separate tax exemption. For this, the taxpayer will have to inform about the loan and its interest payment in the Income Tax Return. Interest letter will have to be taken from the concerned bank as proof and submitted.
Tax saving formula while living in parents’ house
On the other hand, if you live in your parents’ house, you can also save tax by paying rent to them every month. The condition is that they should actually pay rent and inform the Income Tax Department. If the rent paid is more than Rs 1 lakh annually, then to avail income tax exemption, the PAN number of the parents will have to be filled in the form. Apart from this, rent agreement will also have to be put in place. After this the rent amount is added to the income of the parents. If the parents do not have any other income then they will not have to pay any tax on this income. In this way, you can take full benefit of HRA while living with your parents.
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