House Rent Allowance

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

The deduction of HRA can be claimed under section 10-13A of the Income Tax Act in the following manner.

The least of the below is allowed as HRA exemption:

• Actual HRA received by the employee
• 40 % of salary for non-metro city or 50 % of salary if the rented property is in Metro cities like Mumbai,Delhi, Kolkata and Chennai)
• Actual rent paid minus 10% of salary.

Important Points:

1. Here Salary would include basic salary, dearness allowance and fixed percentage of commission.
2. HRA in excess of the above exemption will be taxable under the heads of salary income.
3. Documents like rent receipts and rental agreements will be required to be submitted to the employer for claiming the deduction for the house rent allowance.
4. 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.
5. In case, HRA exemption has not been provided by the employer, the Employee, himself can claim exemption of such HRA at the time of filing of Income Tax Return, subject to the employer has mentioned the HRA amount separately in form 16A.

Exemption of HRA u/s 10 (13A) can be claimed only if it is mentioned in form 16. If it does not mention in form 16A that means your employer has not provided a separate component of HRA.

HRA can be claimed when a separate component towards HRA is given by the employer in your salary. However, In absence of it, you can claim for rent paid under section 80GG.