HRA Exemption: A guide to claim full HRA exemption while filing ITR in India

HRA Exemption

HRA Exemption: The House Rent Allowance (HRA) exemption calculation relies on factors such as salary, HRA component, rent paid, and location. To claim HRA as an exempt allowance, it needs to be included in the salary details while filing form ITR-1, with rent receipts as proof. You can claim HRA even if you are availing home loan benefits, meaning you can benefit from both HRA and interest on home loans, provided certain requirements are met. Accurate information and correct documentation are essential to prevent any complications arising from false HRA claims.

What is HRA exemption limit one can claim in ITR?

The amount of HRA exemption that one can claim is subject to certain limits and conditions. In fact, the Income Tax Act of India does not specify any maximum limit for claiming HRA. However, the exempt amount will be the lowest of the following three conditions:

  • Actual HRA received from the employer
  • 50 percent of (basic salary + dearness allowance) for those living in metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40 percent for those living in non-metro cities
  • Rent paid minus 10 percent of (basic salary + dearness allowance)
Read Also: Income Tax Return filing: 6 mistakes that can get you ITR notice

How to claim HRA exemption when living with parents?

HRA exemption is applicable even if you are paying rent to your parents, given you are occupying the property owned by them. Like any other rental arrangement, having a rent agreement between you and your parent is crucial. Along with that, rent receipts must be provided to the employer to claim HRA exemption.

Your parents must also declare the rent received from you as rental income when filing their income tax returns.

Read Also: Income Tax Return: Mismatch in Form-16 and Form 26AS ?

How to claim HRA exemption while filing ITR?

HRA should be declared in your income tax return. If you are a salaried individual and receive Form 16 from your employer, the exempt portion of the HRA is mentioned under Section 10 in the form. It’s important to note that while filing your ITR, the total HRA received, the exempt portion and the taxable portion need to be reported separately.

In case you have yet to receive Form 16, the TDS details can be filled out using Form 26AS. This form is used to compare TDS deducted from income with TDS deposited by the deductor. Form 26AS also provides an option to verify Form 16A in case it is absent. If you make an error or omission or need to make changes to your original return, you can file a revised income tax return under Section 139(5) of the Income Tax Act.

Read Also: Income Tax Return: Retirement benefits like PF and Gratuity taxable?

How to claim HRA if not given by employer?

Many forgets to submit Rent receipts to their employers for HRA exemption while sometimes the companies does not accept the proof submitted by the companies for giving HRA Exemption. Many wonders how to claim HRA if not submitted proof in company?

In such scenarios, the individual will be required to calculate the right amount of HRA exemption and claim the same from the salary. As per the provisions of Section 10(13A) of the IT Act, exempt HRA can be claimed directly in their Income Tax Return.

Thus, you can claim the actual amount of HRA in the ITR as income computed in Form 16 is on an estimated basis. When HRA deduction is claimed while filing ITR, the excess taxes that the employer would have deducted will either be refunded or it will automatically be adjusted against other income not considered in Form 16.

Read Also: Things to keep in mind while filing income tax return this year

How to claim HRA deduction if not mentioned in form-16?

If Form 16 doesn’t have any information about HRA then you can claim tax deduction on rent paid under Section 80GG. As per Section 80GG, if you are staying in a furnished or unfurnished rented accommodation and Form 16 doesn’t have HRA provision then you can claim it under this section.

The lowest of these will be considered as the deduction under this section-

  • Rs.5,000 per month or 60,000 per year
  • 25% of the total income (excluding long-term capital gains, short-term capital gains under section 111A and Income under Section 115A or 115D and deductions under 80C to 80U. Also, income is before making a deduction under section 80GG).
  • Actual rent less 10% of income
Read Also: Penalty for not showing the income in Income Tax Return
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