How much house rent is tax free?

In India, the amount of house rent that is tax-free depends on various factors such as the individual's salary, the city of residence, and whether the individual receives a House Rent Allowance (HRA) as a part of their salary. The tax exemption for house rent is determined under Section 10(14) of the Income Tax Act, 1961, and Rule 2A of the Income Tax Rules, 1962.

What is maximum HRA allowed?

Under Section 10(14) of the Income Tax Act, the amount of House Rent Allowance (HRA) that is allowed as a tax exemption depends on the least of the following three amounts: 1. Actual HRA received from the employer. 2. Rent paid minus 10% of the salary (Basic salary + Dearness Allowance, if applicable). 3. 50% of the salary

Can I claim for HRA exemption if I am living with my parents?

Yes, you can claim for HRA exemption even if you are living with your parents, provided you meet certain conditions: you must actually pay rent to your parents, your parents must include the rental income from you in their income tax return, your parents must own the property in which you are residing, even though you are living with your parents, for tax purposes, they are considered your landlord, it is advisable to maintain proper documentation of the rent payments made to your parents, such as bank transfers or receipts, to substantiate the rent payment claim.

Is it necessary to submit my landlord’s PAN card to claim HRA deduction?

To claim tax exemption on HRA (House Rent Allowance), as a taxpayer, you need to submit your rent receipts as supporting documents. Additionally, in cases where the annual rent paid for the housing unit exceeds Rs. 1 lakh, you are required to provide the PAN Card details of your landlord/landlady along with the rent receipts.

Who Cannot claim HRA exemption?

Self-employed individuals, including freelancers, consultants, and business owners, cannot claim HRA exemption since they do not receive HRA as a part of their income.

How to Calculate HRA Tax Exemption Online in India

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What is HRA or House Rent Allowance?_WC

What is HRA or House Rent Allowance?

HRA or House Rent Allowance makes up one component of your salary to cover the costs of renting while you are employed by your organisation. This cost is built into your salary that your company credits and can be claimed as a tax exemption under Section 10(13A) of the Income Tax Act. Under most circumstances, one can claim up to 50% of their salary as HRA, if they reside in a metro city.

While HRA is a benefit that is mostly extended to salaried individuals, self-employed individuals may also be able to claim HRA benefits under Section 80GG of the Income Tax Act.

One should remember that the new Tax Regime does not offer any HRA exemptions, and should pick a tax regime that suits their financial standing and goals.

How is House Rent Allowance Calculated?_WC

What are the things to Keep in Mind While Calculating HRA Exemptions

Here are certain conditions to bear in mind when you want to calculate your HRA exemption amount:

If you stay in a metro city, you may be eligible to claim up to 50% of your base salary. If you live in a non-metro city, you can stand to claim up to 40% of your base salary.
To be able to claim HRA, one of the main pre-requisites is that you reside in a rental property.
You can claim an exemption if you live with your parents and pay them rent. To be able to do so, your parents should be the owners of the property and show the rent they receive as rental income in their tax returns.
Some other factors that can help your HRA exemption eligibility are:
- Your pay slip should carry the HRA details included in your pay
- Your rental receipt should bear your name

Can one Claim Both HRA and Home Loan Tax Exemption?_WC

Can one Claim Both HRA and Home Loan Tax Exemption?

These days, most people opt for a Home Loan to fund the purchase of their real estate property, primarily due to two different reasons. First, real estate has become quite expensive and it is nearly impossible for borrowers to afford to buy a home without external financial assistance. Secondly, Home Loan tax benefits allow borrowers to save a lot of money in the long run.

Under Section 80C of the Income Tax Act, one can claim tax exemptions up to a maximum of Rs.1.5 Lakh on payments made towards interest repayment and under Section 24(b) of the Income Tax Act, one can claim tax exemptions up to a maximum of Rs.2 Lakh on payments made towards interest repayment. Thus, a taxpayer can save up to Rs.3.5 Lakh per annum by way of a Home Loan. Further, partners can claim these tax exemptions separately, making it possible for them to save up to Rs.7 Lakh in taxes each year by way of a Home Loan.

The next question is can one claim HRA and Home Loan exemption together? The answer is yes. No section of the Income Tax Act states that one cannot claim both HRA and Home Loan interest exemption together. However, if the amount you are claiming as HRA is quite high, know that the income tax department will ask you to explain why you are staying in a rented apartment when you already have a home. In conclusion, it is possible to claim both HRA and Home Loan exemption but if you are doing so, expect to face some scrutiny from income tax officials and be prepared with your answers.

*Terms and conditions apply.

Eligibility to Claim Tax Deduction on HRA

Check the eligibility criteria to claim HRA tax deduction. If you fulfill the following criteria, you may claim a portion of the HRA as tax deduction under Section 10(13A) of Income Tax Act (ITA):

You must be a salaried or paid employee.
You need to live in rented accommodation.
HRA must be a component of your pay-slip.
Your name must be visible on the rent receipt. It indicates that you actually pay the rent for the accommodation.

Documents Required to Claim HRA Exemption

What are the Documents Required for HRA Exemption

To be able to claim your HRA exemption, you should have the following documents:

Rental agreement (with details about the property, address, duration, etc. included)
Rental receipt
Owner’s PAN Card details, if the annual rent exceeds Rs.1 Lakh
Revenue stamp along with the owner’s signature

*Terms and conditions apply.

Frequently Asked Questions

If you live in a metro city, you may be able to claim up to 50% of your base salary, and if your place of residence is a non-metro city, you stand the chance to claim up to 40% of your base salary.

Aside from this, you can claim the entire amount that is booked under HRA in your salary break-up.

You may, if you pay rent to your parents, and if your parents are the legal owners of the property. Your parents will be required to declare the rent they receive as rental income in their income tax returns.

You may be asked to submit your property owner’s PAN Card at the time of claiming exemptions if your annual rent payable exceeds Rs.1 Lakh.