Housing is one of the basic human needs. Some people own a house, and some live in service quarters provided by the government, while some live in rented apartments. Considering the importance of sustaining this facility, many employers offer House Rent Allowance (HRA) to their employees. The amount may vary as per the designation or salary division of an employee. Some employers can also choose to offer a lumpsum amount annually to support their workers. However, this allowance is not mandatory, and your employer may also avoid providing this adjustment.
Most taxpayers wonder how they can claim HRA exemption while filing their tax returns if there is no such break-up defined in their salary slips. If you also have similar concerns, click here to read more about HRA exemption. Well, the Income Tax Department provides this exemption to salaried employees who live in rented apartments. So, if you are paying rent from your monthly income, you can claim this exemption by following a few simple steps.
HRA Exemption Eligibility Criteria: Who Can Claim?
House Rent Allowance Exemption is a redeeming deduction offered to salaried individuals who live in rented apartments. If you receive HRA from your employer, you can directly claim this exemption in your annual tax return file. However, if HRA is not a part of your salary statement, you will have to claim this exemption under Section 80GG of the Income Tax Department. In this case, you or any of your immediate family members must not own any residential property in the city.
Factors To Consider Before Applying For HRA Exemption
Before applying for an HRA deduction, there are a few factors that you must consider as a taxpayer. It is crucial to pay attention to these details to ensure hassle-free tax return filing.
Conditions To Fulfil
You must meet a few conditions to avail of this deduction without facing any rejection.
- You must not accept or acquire any amount from your employer as HRA to claim an exemption under Section 80GG.
- You must not own any residential property in the city you live in. So, even if you have a family house in the city where you work and stay, you will not be eligible for this exemption.
- You can own a house in another city from a different occupation, but it should be let-out property. You cannot self-own it or leave it vacant.
Proper Calculation
Understanding the proper calculation of HRA deduction is also a vital part of the process. If you do not have a knack for these things, take the help of a professional.
Required Documents
You will need to provide supporting documents like your rent receipt, salary statement, PAN Card, etc., to claim HRA deduction. Verify the list of documents from an authorized individual.
Maximum Limit On HRA Exemption Under Section 80GG
If you do not receive HRA, you will claim this exemption under Section 80GG. In this case, the limit will be the minimum of:
- INR 5,000 per month
- 25% of your adjusted income
- The actual rent amount minus 10% of your adjusted income.
Here, adjusted income implies your total income minus short-term capital gains, long-term capital gains, income under Section 115D or 115A, and 80U to 80C deductions. This calculation is complicated, and you must take the help of a reliable source to make these calculations.
HRA exemption is available to every taxpayer who meets the eligibility criteria and lives in a rented apartment. You just need to take the help of a reliable service provider to file your tax returns considering all the given aspects. With a properly documented tax file, you can avail of this tax deduction every year.