A Detailed Discussion On HRA (House Rent Allowance)
Definition of HRA:
In the simple words, Human rent allowance is the share of the salary of an employee, which is given by his employer for rent accommodation.
Who can claim HRA?
The definition clearly suggests that a person, who is living in a rented house, can claim HRA. It is covered under Section 10(13A) of the Income Tax Act. A person can claim its exemption in partly or wholly.
Who is restricted from claiming HRA?
An employee, who is actually not residing in a rented accommodation is restricted from claiming it under the prescribed Section of the Income Tax Act.
How HRA is useful for an individual?
HRA is useful for an individual as he can save tax by taking its exemption.
Factors estimating HRA:
Basically, there are four factors which help in the estimation of HRA, mentioned below:
- Gross Salary of an individual.
- Percentage of HRA to salary.
- Value of house rent
- City Of Rented House
How to calculate HRA?
The HRA is calculated with one of the lowest valued provisions among three, which are mentioned below:
- Amount Of HRA transferred by the employer
- Actual value remunerated ( Rent- 10% of basic salary)
- For people living in metro cities ( 50% HRA)
For people living in non-metro cities (40% HRA)
The lowest amount among these three can be claimed as HRA.
Now, understand the calculation of it by considering an example,
Consider Shyam’s basic salary Rs. 40,000 per month
HRA provided by the employer is Rs. 20,000 per month
10% of annual basic salary is Rs. 48,000
Shyam resides in New Delhi (Metro City) and paying the rent of Rs. 15,000 per month.
Let’s calculate the amount of the provisions:
Amount transferred by the employer= 40,000*12= Rs. 4, 80,000
Actual amount paid- 15,000*12- 48,000= 1,32,000
Metro city allowance= 50% of basic salary= Rs. 2,40,000
Hence, the amount of the HRA for exemption is 1,32,000, the lowest of the three provisions.
FAQ’s in the end:
Is there need of the pan card details of the landlord to claim HRA?
Not necessarily, but when you are paying rent more than Rs. 1,00,000, then you need to show the pan card details of your landlord in your tax return so that you can claim HRA.
Can I claim house rent allowance when my employer is not paying me HRA?
Yes, an individual is allowed to get an exemption of the loan under Section 80GG of Income Tax Act for tax deduction even he does not get any HRA from the side of the employer.
How to claim HRA when you are living with parents?
While living with parents, HRA can be claimed if you come in a rent-agreement with your parents.
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