For many service class people, it is a struggle to file the income tax return (ITR) or to make savings declarations at the beginning of the financial year, because many people do not have a better understanding of it. And worthwhile, by making accurate savings declarations, the individual can avoid heavy income tax and can also plan his expenses for the year.
A similar declarations is made by people who live in rented houses, and who receive house rent allowance (house rent allowance or HRA) in salaries. House rent allowance is a component of salary provided by employer to an employee to meet his rental expenses. An employee who lives in rented house can declare his rent paid for the year and claim deduction from HRA received.
To Get the Details in Quick, Let Us Go Through Some Points Mentioned:
First of all, you have to understand that the individuals who are entitled to income tax exemptions on the house rent allowance must have HRA component in salaries, and one can claim the deduction paid for the house.
HRA is a special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent in respect of residential accommodation occupied by the assessee, having regard to the area or place in which such accommodation is situated and other relevant considerations.
As per section 10(13A) of the income tax act, No exemption will be available if :
- the residential accommodation occupied by the assessee is owned by him, or
- the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him
Another important thing to remember is that if you are paying home rent more than Rs.1,00,000 per year (i.e. 8,333 rupees per month), you should enter the PAN number of the landlord (even if they are a mother or father or wife) which obliges them for the income tax payment. So, in order to get income tax exemption on the house rent allowance, it is important to have pan number of the holder if the rent paid exceeds Rs. 100000 in a year.
Quantum of Exemption
Rule 2A of the income tax act prescribes the quantum of exemption available, which will be the least of the following :
- HRA actually received
- Rent paid in excess of 10% of salary
- 40% of salary (50% in case of metro-cities)
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