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HomeFAQsFrequently Asked Questions on HRA (House Rent Allowance)

Frequently Asked Questions on HRA (House Rent Allowance)

Q. When can I claim a tax exemption on house rent allowance?

A. You can claim tax exemption on HRA in a case where you pay rent for your residential accommodation.

Q. How can I claim HRA exemption?

A. You can claim HRA exemption by submitting proofs of rent receipts to your employer. Alternatively, you can claim the HRA exemption yourself while filing your income tax return.

Q. Can a self-employed individual claim HRA exemption?

A. A self-employed individual cannot claim HRA exemption. Only a salaried individual having an HRA component in their salary package can claim HRA exemption.

Q. What is the tax liability in case my entire HRA is not tax-exempt?

A. The balance HRA which is not tax-exempt is payable to the employee after deducting tax at the applicable slab rates.

Q. What is the full form of HRA?

A. HRA means House rent allowance in income tax. It means the component of salary received towards the rent payment and is allowed as a deduction from taxable salary subject to the maximum deduction allowed as per the rules.
Q. What is an HRA allowance and how to calculate HRA?

A. HRA means House rent allowance in income tax. It means the component of salary received towards the rent payment and is allowed as a deduction from taxable salary under section 10-13A. HRA exemption is allowed least of the below :

  • Actual HRA received by the employee
  • 40 % of salary for nonmetro city or 50 % of salary if the rented property is in Metro city like Mumbai, Delhi, Bengaluru, Chennai, etc)
  • Actual rent paid less than 10% of salary.

For the above calculation, the salary would include basic, dearness allowance and a fixed percentage of commission.

Q. Who can claim HRA exemption?

A. Salaried employees who receive house rent allowance as a part of salary and make a payment towards rent can claim HRA exemption to reduce their taxable salary wholly or partially.

 

Q. HRA comes under which section of income tax?

A. House rent allowance received by an employee is partially or wholly exempt as per the conditions laid out in section 10(13A)

 

Q. What are HRA and DA?

A. Dearness allowance is a component of salary towards adjustment for cost of living paid generally to government employees, public sector employees, and pensioners. Dearness allowance is calculated as a percentage of basic salary to cover the impact of inflation.

HRA, house rent allowance is a component of salary paid by big employers towards rent payment by the employee. HRA exemption is allowed least of the below :

  • Actual HRA received by the employee
  • 40 % of salary for nonmetro city or 50 % of salary if the rented property is in Metro city like Mumbai, Delhi, Bengaluru, Chennai, etc)
  • Actual rent paid less than 10% of salary.

For the above calculation, the salary would include basic, dearness allowance and a fixed percentage of commission.

Q. How to claim HRA in the income tax return (ITR)?
A. The Taxable portion of the HRA component should be included as a part of ‘ Salary as per section 17 (1)’. The exempt portion of the HRA component is to be added under the heading ‘ allowances to the extent exempt u/s 10 (ensure that it is included in salary income u/s 17 (1) 17(2) 17 (3) ).’

 

Q. How to claim HRA if not mentioned in form-16?
A. If HRA is not mentioned in form 16 it means your employer has not provided a separate component of HRA. HRA u/s 10 (13A) can be claimed when a separate component towards HRA is given by the employer. In absence of it, you can claim for rent paid under section 80GG.
Q. How to save HRA?
A. HRA can be at most claimed as according to the lowest of these three amounts
(i) house rent allowance received
(ii) 40% (non-metro city) or 50% (metro city ) of the salary
(iii) actual rent paid less 10% of salary.
Please note that you can claim HRA if you are residing at your parents’ owned house provided that you transfer the rent to your parents. Please note that your parents will have to report this rental income in their return of income for taxability purposes. In case your parents have income less than basis exemption, no taxability arises in their hands.
Further, the benefit of HRA can also be claimed if you own a house and are claiming a deduction for principal payment u/s 80C and interest deduction u/s 24. The reason for residing in a rented house should be genuine and valid. This arrangement can be closely monitored by the IT department.

Q. What is an HRA certificate?

A. HRA certificate is a certificate issued by the government employee for claiming house rent allowance because of the reason of not being able to avail government accommodation in accordance with the prescribed procedure.
Q. How to submit HRA proof for ITR?
A. Documents like rent receipts and rental agreements will be required to be submitted to the employer for claiming the deduction for house rent allowance. If the payment of rent is more than Rs 1 lakh per annum, then the PAN of the house owner will be required to be submitted. On the basis of these proofs, employers would provide a deduction for HRA in form 16.

 

Q. How much HRA can be claimed without proof?

A. Rent receipts are mandatorily required by the employer as proof for claiming house rent allowance deduction.

Also Read: GST: FAQs on Filing Form GST CMP-08

Q. What happens if HRA is not claimed?
A. If you have missed submitting the rent receipts and rent agreement to your employer at the time of proof submission, you can claim the HRA deduction while filing ITR.
In case you miss to claim the HRA while filing a return, you can file a revised return to correct the error before the end of the assessment year.

Q. What is the maximum limit for HRA?

A. As according to section 10 (13A), An employee can claim an HRA deduction maximum up to the actual HRA component received from the employer.

 

Q. Can I claim both 80GG and HRA?
A. No, individuals paying rent but do not receive house rent allowance are allowed to claim deduction under section 80GG. Also, the individual, spouse, or children should not own a house property in the place of employment for claiming this deduction.
TaxClue Teamhttp://taxclue.in
Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.

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