FAQ’s on House rent allowance(HRA)

1. Who can claim HRA?

Salaried employees who have HRA as salary component and reside in rented accommodation are eligible to claim HRA benefit. 

2. Is HRA fully taxable?

No.  Least of the following is exempted

a. Actual amount of HRA received

b. 50 percent of salary in case of metro cities and 40 percent in case of non-metro cities

c. Actual rent paid reduced by 10 percent of salary

Salary for the purposes of HRA is basic salary and dearness allowance

3. What are the documents required for claiming tax exemption of HRA?

The following documents are required for claiming tax exemption

a. Rent receipts or rental agreement
b. PAN of the landlord in case the rental payments exceed INR 100,000/- per annum
4. Can rental payment to parents be eligible for claiming tax exemption of HRA?

Yes. But there must sufficient documentary evidence to prove the authenticity of the transaction. 

5. Can a person avail the benefit of HRA if he owns a property?

Yes.  In case the person owning the house property is working in a different city can avail the benefit of HRA if he residing in a rented premises.  Further the individual can take benefit under section 24 for the interest paid and under section 80C for repayment of principal on account of loan taken to purchase the house property.

6. What are the other benefits under the Indian tax law, if the person does not get the benefit of HRA but still pays rent?

The person who pays rent and has not availed the benefit of HRA, can claim deduction under 80GG.  Following are the conditions to be satisfied to claim deduction under section 80GG:

a. Deduction is allowed only to salaried or self-employed personnel;

b. HRA is not received at any time during the year

c. The individual or spouse or the child or the HUF of which the individual is a member shall not own any residential accommodation at the place where you currently reside, perform duties of office, or employment or carry on business or profession.

7. What is the quantum of deduction allowed under Section 80GG?

Lower of the following shall be allowed as deduction under section 80GG:

a. INR 5,000 per month

b. 25 percent of total income

c. Actual rent reduced by 10 percent of total income

8. What is total income under section 80GG?

Total income is calculated as gross total income reduced by long-term capital gains, short-term capital gains where Securities Transaction Tax (STT) has been paid and deductions available under Sections 80C to 80U, except Section 80GG.

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