Salaried individuals who live in a rented house can claim House Rent Allowance or HRA to lower taxes. This can be partially or completely exempt from taxes. The allowance is for expenses related to rented accommodation. If you don’t live in a rented accommodation, this allowance is fully taxable.
The deduction available is the minimum of the following amounts:
Yes, you may. HRA has no bearing towards your home loan interest deduction. Both can be claimed.
Try out our free HRA calculator to determine your HRA exemption. This calculator shows you on what part of your HRA you have to pay taxes – i.e. how much of your HRA is taxable and how much is exempt from tax.
If you have taken a house on rent and are making a payment in excess of of Rs 8,333 per month – remember to obtain the landlord’s PAN or you may lose out on the HRA exemption. Landlords without a PAN must be willing to give you a declaration.
If you are making payments towards rent for any furnished or unfurnished accommodation occupied by you for your own residence, but do not receive HRA from your employer, you can claim deduction under section 80GG.
Conditions that must be fulfilled to claim this deduction –
In case you own any residential property at any place other than the place mentioned above ,then you should not claim the benefit of that property as self occupied. That other property would be deemed to be let out in order to claim the deduction under section 80GG.
The lowest of these will be considered as the deduction under this section –
Samiksha works at an MNC in Bangalore. Her company provides her with house rent allowance. But she doesn’t live in a rented accomodation; she lives with her parents instead. How can she make use of this allowance?
Samiksha can pay rent to her parents and claim the allowance provided they own the place they currently live in. All she has to do is enter into a rental agreement with her parents and transfer money to them every month.
This way Samiksha can make a nice gesture and give back to her parents, and two, save some taxes.
But remember: Samiksha’s parents will have to show the rent she paid in their income tax returns. But as a family you will be saving up.
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