👍👍👍👍👍All about HRA Exemption, Eligibility, Limit etc.

lipped from: https://taxguru.in/income-tax/hra-exemption-eligibility-limit.html

What is HRA- House Rent Allowance

HRA is paid to Salary individuals by the employer.

HRA exemption can be claimed only by Salaried Individuals residing in rented places hence any salaried individual not residing in a rented place cannot claim this exemption.

An important point to note that the HRA exemption is available only if you are opting for an OLD TAX REGIME that is HRA exemption is not available in the NEW TAX REGIME

Calculation of HRA:

The amount of Exempt HRA will be the least of the following amounts:

  • Amount of House Rent Allowance received from Employer
  • Rent paid less than 10% of the salary
  • 50% of the salary for Individuals live in a metro city
  • 40% of the salary for Individuals live in non-metro city
Salary= Basic Salary + DA(Dearness Allowance)

Let’s understand it with an example:

Example 1: Mr. Singh working in Mumbai and residing in a rented place. His Gross salary is 8,00,000 per annum and he is paying rent of 25,000 per month.

The salary structure of Mr. Singh is as follows:

ParticularsAmount
Basic Salary4,00,000
HRA (25% of Basic salary)1,50,000
Other allowances3,50,000
Gross Salary8,00,000

Now calculate HRA

1. Amount of House Rent Allowance received from Employer2.  Rent paid less than 10% of the salary3. 50% of the salary for Individuals live in a metro city1. 1,50,0002.     25000*12= 3,00,000-10% of 4,00,000= 2,60,0003. 2,00,000Lower is 1,50,000

HRA exemption is Rs. 1,50,000 i.e., Lower than above 3.

FAQs on House Rent Allowance

 Q.1 How you can check if you are getting an HRA exemption or not?

Ans: You can check the same in your salary slip or you can ask your employer for the same.

Q.2 What if your employer is not providing HRA to you?

Ans: If you are not getting HRA then you can claim a deduction u/s 80GG of the Income Tax Act, 1961.

Conditions to claim deductions u/s 80GG:

1. Paying rent

2. Not getting HRA from employer

3. Don’t have any self-owned house property at any other place

4. You, your spouse, or minor children do not own residential house property at the place of employment

In that case, you can get a deduction under section 80GG subject to the least of the following :

  • 5,000 per month or 60,000 annually
  • 25% of the total Income
  • Rent paid less than 10% of total Income

Q.3 How HRA exemption can be claimed?

Ans: HRA exemption can be claimed by submitting rent agreements or rent receipts from your landlord to your employer.
It is required to be submitted at the time of Investment declaration.

Q.4 Is the HRA deduction part of the 80C deduction and included under the amount of 1,50,000?

Ans: HRA is not a deduction U/s 80C. It is an allowance to be deducted as an exemption from salary. Hence this is above 1,50,000.

Q.5 Is there any limit on claiming HRA?

Ans: A Salaried employee can claim HRA up to the amount of actual HRA component received from employer.

Q.6 What is the difference between HRA and 80GG?

Ans: Chapter VI-A of the Income Tax Act, 1961 provides tax relaxation to those who do not avail of house rent allowance. This deduction is available only to individuals residing in a rented property.

Q.7 Can an Individual claim both 80GG and HRA?

Ans: No, only one can be claimed at a time. Any individual not receiving HRA can claim 80GG.

 Q.8 How much can be claimed U/s 80GG?

Ans: The least of the below can be claimed as a deduction u/s 80GG:

1. 25% of annual salary

2. 60,000 annually (Rs. 5,000 monthly)

3. The amount that is equal to the total rent paid minus 10% of the total income

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