Understanding House Rent Allowance (HRA):
House Rent Allowance (HRA) is a part of an employee's salary that can be partially or fully exempt from taxes as per Section 10(13A) of the Income Tax Act. The calculation of HRA depends on various factors, including the employee's salary, rent paid, HRA received from the employer, and the city of residence.
HRA for Self-Employed Individuals:
Self-employed individuals can also claim deductions and tax exemptions for House Rent Allowance (HRA) under Section 80 GG.
HRA for Salaried Individuals:
Salaried individuals can claim exemptions for House Rent Allowance (HRA) under Section 10(13A), rule number 2A of the Income Tax Act. It's essential to adhere to the company's policies regarding HRA claims.
Calculating Tax Exemption from HRA:
The tax exemption is the least of the following amounts:
1. Actual HRA received.
2. 50% of [basic salary + DA] for metro cities (Delhi, Kolkata, Mumbai, or Chennai) or 40% for non-metro cities.
3. Actual rent paid minus 10% of basic salary + DA.
Frequently Asked Questions (FAQs) on HRA:
The article includes a set of common questions related to HRA and their corresponding answers.
Claiming HRA and Deduction on Home Loan Interest:
Both HRA and home loan interest deductions can be claimed simultaneously as they are separate components.
When a Landlord's PAN is Required:
If the annual rent payment exceeds Rs. 1 lakh, the landlord's PAN must be provided to claim HRA exemption. If the landlord does not have a PAN, a self-declaration is required.
Claiming HRA Without Receiving an HRA:
Individuals who pay rent for their residential accommodation but do not receive HRA from their employer can claim deductions under Section 80GG if certain conditions are met.
Claiming HRA While Living With Parents:
Employees living with parents can still claim HRA exemption by paying rent to their parents and having a valid rental agreement.
Claiming Deduction Under Section 80GG:
The least of certain amounts is exempted from tax under Section 80GG for individuals who do not receive HRA.
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