HRA Exemption – House Rent Allowance
The House Rent Allowance (HRA) can be claimed to reduce taxes by the employees who reside in leased homes—wholly or partially. The assistance covers expenditures for rental lodging. This allowance is entirely taxed if you do not live on the leased property.
When living with my parents, how can I claim HRA?
Let’s get an example of this.
In Bangalore, Samiksha works in MNC. Although her business gives her HRA, she does not live in a rented hotel rather than with her parents in her house.
How can she utilise this subsidy?
Samiksha may pay her parents rent and request the amount of the allowance. She only has to sign a leasing agreement with her parents, and every month she transfers money to them. Samiksha may do her parents a kind gesture while saving taxes in this way. Samiksha’s parents also have to disclose on their income tax returns the rent they paid as income. If your other income is below the basic level of exemption, or if you can pay tax on a lower tax limit, you can save family income tax.
What if I don’t get HRA from my employer?
You can still claim a deduction under section 80GG when you pay for any residential accommodation you are occupying but do not get HRA from your employer. Conditions to claim this deduction that must be met:
- You’re independent or paid.
- During the year you claim 80GG, you have not received HRA at any time.
- You, your spouse and your small kid, or HUF of which you are a part, do not have any housing in the location where you now dwell, office or work.
If you own a residential home elsewhere, then the benefit of the property should not be claimed as self-occupied property. This is because to claim the 80G G deduction, another property in your name is judged to be exhausted.
FAQ’s HRA Exemption
✅ How do you compute the HRA tax exemption?
- Actual HRA received by the employee.
- The current rent paid is less than 10 per cent of the wage.
- For individuals residing in metro towns, 50 per cent of basic salary.
- For non-metro cities, 40 per cent of the base salary.
✅ Can I rent and claim HRA from my wife?
Yes, you can pay rent to your wife or your parents for tax exemption from HRA. Paid loans are considered to be the income of a spouse or parent.
✅ What’s the salary for HRA?
House Rent Allowance is a part of your employer’s income for the charges of rental accommodation. Only if you live in a house you can claim HRA exemption. Under Article 10(13A) and Rule 2A of the Revenue Tax Act of 1961, the HRA exoneration is covered.