HRA 

BY - NILESH M



HRA stands for House Rent Allowance, it is an allowance provided by an employer to an employee. The main intention of this is to meet the cost of renting a home. Everybody whose salary package includes HRA is potentially eligible to get some deduction in Income Tax. Most, of the government and private employees have HRA as part of their salary package. In order to get income tax deduction for HRA, you must be paying rent for your accommodation; merely receiving HRA won’t help you to get tax benefit.


For the purpose of discussion on HRA, salary means your Basic + Dearness Allowance (DA).

For Salaried persons

It is exempt for a salaried person if house rent allowance (HRA) is provided to him as a part of compensation for the services rendered. The maximum amount of exemption that he can get is the amount paid by the employee*.

Other Individuals

These includes who do not receive HRA, government has made a provision under section 80GG, as per this, a non- Salaried Individual can also avail a maximum deduction of Rs 2000 every month i.e. 24,000 per annum.

How to deal with HRA (House Rent Allowance) 

MINIMUM OF BELOW

• You should have an HRA allowance as part of your salary package.
• You must be staying in a rented house and paying rent for it.
• Rent should exceed 10% of your salary.

How Much HRA You Can Claim 

• The actual amount of HRA received.
• 40% of salary. This increases to 50% if you are staying in Chennai, Delhi, Kolkata or Mumbai.
• Rent paid minus 10% of Salary (Basic + Dearness Allowance)

Exemptions for HRA

• Rent given to your parents
• Took a home loan and bought a home but are not residing
• Home loan for a home in a city where you are not residing

Rent given to your parents

You can claim tax deduction on the rent given to your parents. If you are living with your parents and pay them rent they will be the landlords. One of them should declare it in his/ her personal income tax return to prevent litigation in the future.

Took a home loan and bought a home but are not residing

If you took a home loan and have bought a home but are not residing in it because of some genuine reasons you can get the following benefits

• Tax benefit on principal repayment under Section 80C
• Tax benefit on interest payment under Section 24
• HRA benefit

Home loan for a home in a city where you are not residing

In this case also you can avail the same benefits in the previous case such as;

• Tax benefit on principal repayment under Section 80C
• Tax benefit on interest payment under Section 24