Tax Exemption From HRA and How to Calculate?,
The deduction available is the least of the following amounts:
a. Actual HRA received;
b. 50% of [basic salary + DA] for those living in metro cities, Delhi, Chennai, Mumbai and Kolkata. For non metro 40% for non-metros
c. Actual rent paid less 10% of basic salary + DA
Claim HRA and Deduction on Home Loan Interest as well?
Yes, we may claim the HRA as it has no bearing towards your home loan interest deduction. HRA and Home loan interest can be claimed.
Do You Need Landlord’s PAN?
House on rent making a payment in excess of Rs 1 lakh annually – remember to provide the landlord’s PAN. Else, you may lose out on the HRA exemption. Tenants paying rent to NRI landlords must remember to deduct TDS of 30% before making the payment towards rent.
What if my Employer Doesn’t Provide me With HRA?
If pay rent for any residential accommodation occupied , but do not receive HRA from your employer, still you can claim the deduction under Section 80GG. Conditions that must be fulfilled
a. You are self-employed or salaried
b. You have not received HRA at any time during the Financial year for which you are claiming 80GG
c. You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of office or carry on business or profession.
In case you own any residential property at any place other than the place mentioned above, then you should not claim the benefit of that property as self-occupied. Other property would be deemed to be let out in order to claim the 80GG deduction.
Example
Mr. Ram Sankar, employed in Chennai, has taken up an accommodation on rent for which he pays a monthly rent of Rs 15,000 during the Financial Year (FY) 21-22. He receives a Basic Salary+ DA of Rs 27,000 monthly, which forms a part of the salary. Also receives a HRA of Rs 1 lakh from his employer during the year. Let us understand the HRA component that would be exempt from income tax during the FY 21-22
| # | Particulars | Amount (in Rs.) | |
| 1 | Actual HRA received | 1,00,000 | |
| 2 | Rent paid (15000 p.m. * 12 months) minus(-) 10% of {(27000p.m.*12) i.e.10% of Basic + DA | 1,47,600 | |
| 3 | 50% of {(27000p.m.*12) (50% is considered as the accomodation is in Chennai) | 1,62,000 | |
| 4 | Exempt HRA = lowest of 1,2,& 3 | 1,00,000 |
If his annual HRA received is 1,60,000, then 1,47,600 can be exempt from income tax.
Claim Deduction Under Section 80GG
The least of the will be considered as the deduction under this section:
a. Rs 5,000 per month
b. 25% of adjusted total income*
c. Actual Rent less 10% of adjusted total Income*
*Adjusted Total Income means Total Income Less long-term capital gain, short-term capital gain under section 111A and Income under section 115A or 115D and deductions 80C to 80U (except deduction under section 80GG).
Can I Claim HRA When Living With Parents?
Janaki works in an MNC in Bangalore. Though her company provides her with HRA, she lives with her parents in their house and not in rented accommodation.
How can she make use of this allowance?
Janaki can pay rent to her parents and claim the allowance provided. What she has to do is enter into a rental agreement with her parents and transfer money to them every month. This way Janaki can make a nice gesture to her parents while saving on taxes.Parents will have to show the rent she paid on their income tax returns. However, they can save a lot as a family!.
