Can an Employee Claim HRA Exemption on a Rented Hotel Room?
HRA is an allowance that can be claimed by a salaried individual who lives in a rented house. If you don’t live in a rented accommodation, the HRA allowance received from an employer is fully taxable.
Basic conditions to be fulfilled to claim HRA are-
- Rent should be paid for the house taken on lease
- The house should not be in your name
- The employee must commute from the rented house to the office
- There must exist a rental agreement and rent receipts of payment of rent
Because of these above-stated conditions, HRA exemption on a rented hotel room cannot be claimed. The relationship between the hotel and you would not be considered as a lessor and a lessee. This relation can be more appropriately termed as that of a service provider and a service recipient. Hence HRA on a hotel room cannot be claimed.
However, when you relocate to a different city for the purpose of employment, any allowance or reimbursement that is received by you from the employer for a stay in a hotel is taxable, only after providing a certain deduction. For the initial 15 days, any allowance received from the employer shall be reduced with the expenditure incurred for accommodation, and the balance amount will be taxed.
It should be noted that any allowance or reimbursement after 15 days would be entirely taxable as salary.
FAQs (Frequently Asked Questions)
- Actual HRA received by the employee
- 40 % of salary for non metro city or 50 % of salary if the rented property is in Metro city like mumbai, delhi, bengaluru , chennai, etc)
- Actual rent paid less than 10% of salary.
For above calculation , salary would include basic, dearness allowance and fixed percentage of commission.