Introduction

House Rent Allowance (HRA) is part of your salary that can lower your taxes if you rent a house. If you work for a salary, it’s important to know HRA exemption rules to pay less tax. Let’s explore how it works!

Key Points

1. Eligibility for HRA Exemption:
   • Only salaried individuals can claim HRA.
   • You must live in rented accommodation (not self-owned).
   • The rent paid should exceed 10% of your salary.
   • HRA must be a part of your salary (check Form 16 for details).
2. How Much Deduction Can You Claim?
   • The deduction is the least of the following:
     • Actual HRA received.
     • 50% of (Basic salary + DA) for metro cities (40% for non-metro cities).
     • Actual rent paid minus 10% of Basic Salary + DA.
3. Documentation Required:
   • Rent receipt provided by the landlord.
   • Rent agreement (if demanded by the employer).
   • Pay rent through cheque or electronic mode.
   • If annual rent exceeds Rs. 1,00,000, mention the landlord’s PAN number.
4. Paying Rent to Family Members:
   • Yes, you can claim HRA by paying rent to parents.
   • Create a rent agreement with your parents.
   • Transfer rent money to their bank account.
   • Parents must show rental income in their tax return.
5. Frequently Asked Questions:
   • Can HRA and Home Loan Deduction both be claimed? Yes.
   • Can HRA be claimed for two rented houses in different locations? No, only for one house.
   • Is a rent receipt required? Yes, if rent exceeds Rs. 5000 per month.
   • Does HRA include electricity/maintenance charges? No, it only includes rent paid.
   • Do tenants have to pay TDS on rent paid to landlords? Yes, TDS at 5% if rent exceeds Rs. 50,000 per month.

Conclusion

Understanding HRA exemption rules can significantly reduce your tax burden. Keep these guidelines in mind and make the most of your HRA benefits!

Remember, financial literacy empowers you to make informed decisions. 🌟