Introduction

Employee who receive salary from employer and who resides in rented houses, can claim the House Rent Allowance to reduce the amount of taxes (it may be partially or wholly).

Table of Content:

Meaning of house rent allowance?

It is the kind of salary component paid by employer to the employee for the expenditure incurred for the rented accommodation.

An individual can claim house rent allowance exemption only if that person residing in a rented house.

Calculation of house rent allowance

It is provided by an employer so that employee can easily meet there renting expenditure.

House rent allowance calculated according to employee salary

  S.NO. CALCULATION OF HRA  EXEMPTION (lower of the three)
1. Actual amount of House rent allowance receive from employer
2.        TWO CASES-

  • If living in metro cities(Mumbai ,Delhi, Chennai ,and Kolkata)
    :50% of (Basic salary+ Dearness allowance)
  • If living in non- metro cities
    : 40% of (Basic salary + Dearness allowance)
3. Actual rent paid minus 10% of (Basic salary + Dearness allowance)

Did we pay rent to parents to save tax?

Save tax – By submit the rent receipts and pay that, you will be able to claim exemption on House rent allowance. Our parents can claim 30% standard deduction on the rental income. In case when they don’t have any taxable income, we will be able to save some amount of tax as a family.

How can we claim house rent allowance if we own a house?

When someone owns a house in another city in such case, the owner is allowed to claim both House rent allowance exemption as well as tax benefits on principal amount and interest repaid on home loan.

For example, Madhavi works with a company in Delhi and stays in a rented apartment.

Can employee claim house rent allowance while filing income tax returns?

Yes, individual can claim House rent allowance while filing income tax returns. In case when an individual do not submit the rental agreement and rent receipts to their employer, the TDS deducted will be higher. However, an individual can claim House rent allowance while filing their income tax returns.

Conclusion

So at the end conclusion is that an individual can claim tax exemption of upto 100% of the actual House rent allowance received. Individual must have correct documents.

Note: When you claim for tax deduction, you or spouse, or minor child, or as a member of the Hindu Undivided Family must not own any house property at that time and at that time if you own any residential property at any place and earn rental income then no deduction is allowed.

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