Income Tax Savings: If the employee of the company lives in his house or does not pay the rent of the house, then the amount received in the form of HRA in his salary will be taxable, which means tax will have to be paid.
Income Tax Savings: Many types of instruments are used to save tax. But, it is important to know which instruments are most beneficial for you. One of these is House Rent Allowance. This is part of your salary. Look carefully at your salary slip, in this some money is given towards HRA. This is part of your taxable salary. But, tax is also saved through this. The benefit of tax exemption in HRA is available only to the salaried class.
Income Tax Exemption on HRA
There is a condition to take income tax exemption in HRA. To avail the exemption, the taxpayer must live in a rented house. Business class does not get the benefit of HRA. Income tax exemption is available on HRA under Section 10(13A) of the Income Tax Act. If you are trying to save tax, then definitely know about how to save tax on HRA. Total taxable income is calculated by deducting HRA from total income.
How to calculate tax exemption in HRA?
Now the question arises that how much tax can you save on HRA. Its calculation is very easy. In any of the three situations given below, whichever amount is the least, the benefit of HRA tax exemption can be availed.
1. What is the share of HRA in your salary.
2. If you live in metro cities like Delhi, Mumbai, Kolkata, then 50% of the basic salary, if you live in non-metro, then 40% of the salary.
3. The amount left after deducting 10% of annual salary from the annual rent of the house actually paid.
This is the way to calculate HRA
First of all, see how much HRA you have received from the company in a financial year. For this calculation, along with basic pay, dearness allowance and other things should be included in your salary.
HRA exemption calculation
Suppose a person works in Delhi and lives on rent. Gives Rs 15,000 a month as rent. His basic salary is Rs 25,000 and Dearness Allowance (DA) is Rs 2,000. He gets Rs 1 lakh as HRA from the employer. In such a situation, the salaried person can save a maximum of Rs 1 lakh as HRA.
Documents required to take advantage of HRA
You must have a valid rent agreement to avail the HRA benefit. The rent agreement should mention the monthly rent, the time frame of the agreement and expenses on your part. The agreement must be signed by you and the landlord, even if the landlord is your parents. This agreement should be on stamp paper of Rs 100 or Rs 200. If the annual rent is more than Rs 1 lakh, then apart from the rent receipt, it is also mandatory to give PAN of the landlord. You should also have a receipt from the landlord after paying the rent.
