You have no recent searches! Please start exploring our plans & calculators. You can also explore various queries by typing a keyword. Or you can also search by tags listed here.
If you have worked for any company and received a salary, you would have come across an HRA component in your salary slip. HRA stands for House Rent Allowance and comes under Section 10 (13A) of the Income Tax Act of 1961.
But very few of you know that this HRA can actually be claimed as HRA exemption under section 80GG as per the income tax rules. Let’s understand what HRA is, how it is calculated, and what are these exemptions.
House Rent Allowance is basically the amount paid in the form of allowance to you by your employer to pay rent for your accommodation. What’s more interesting is that you can claim this allowance as an income tax deduction under section 80GG. Even if your employer might not be paying you HRA, you can still get the HRA tax exemption - on the condition that your accommodation must be rented but not owned. If you own the house you stay in, you cannot claim for HRA deduction even if your employer pays them as part of your salary.
House rent allowance exemption is calculated based on several factors like the place of residence, the salary that is drawn, etc. The maximum HRA exemption limit for an individual living in a metropolitan city is 50% of the basic salary. In any other case, if an individual resides in any other city - the same is calculated as 40% of the base salary that is given to the individual.
HRA calculation is done differently for a self-employed individual and a government or private employee.
HRA is calculated as the minimum of the following three, as per the HRA exemption rule in the case of a government or private employee.
The actual amount that the employer pays under the HRA.
50% of the Basic salary if living in a metropolitan city.
Rent paid minus 10% of basic salary.
Yes, a self-employed individual can also claim HRA tax exemption by filling the form 10BA, which essentially contains the rent pay details of the individual.
In the case of a self-employed individual, HRA exemption is calculated as the minimum of the following three.
Rs 5,000 per month.
25% of the total income earned by the individual.
If rent paid is more than 10% of the total income.
You can submit the rent paid receipt as proof to claim tax exemption. This process sometimes also includes the submission of other documents such as the following.
Rent lease agreement.
Electricity bill, water bill.
Intimation letter that is sent to the cooperative society office regarding rental accommodation.
You need to submit the PAN card of the landlord if the rent payable exceeds the threshold limit of Rs. 1 Lakh. In such cases, it is mandatory to submit the PAN card of the person who is receiving the rent for verification.
In the event, you are staying as a tenant in an NRI’s house and need to pay rent to him monthly. It is compulsory as per statutory requirements that TDS (Tax Deducted at the Source) of 30% needs to be deducted from the rent before paying the same to the NRI.
HRA tax benefits for individuals staying with parents:
As per the income tax rules, you can avail of HRA tax exemption even if you stay with your parents at their home. Provided the house is only in the parent’s name, and you pay a monthly rent to your parents. Necessary proofs for this would be rent received, and rent paid receipts between you and your parents. You may even need to submit the bank transactions as proof during the filing of ITR.
This case does not apply if you are paying rent to your spouse, as rent paid to your spouse cannot be claimed as HRA exemption as per the tax laws.
HRA tax benefits for individuals with a home loan and staying in rented accommodation:
In this special case wherein you already have a home loan and are staying in rented accommodation, you can claim HRA exemptions pertaining to home loan and rented accommodation. Provided your home and the rented accommodation where you stay are in different cities.
If both the house and the rented accommodation are in the same city, you cannot avail of tax benefit without showing a reason for not staying in your home. This could be done by showing that your workplace is far from your home location, and hence you need to rent a place.
Some points to consider for availing of HRA Tax exemption benefits:
Rent receipts are a must even if you are paying rent to your parents.
If you are staying in your own house, you cannot claim for HRA even if your employer contributes to HRA.
While filling out an ITR, bank statements stand as proof of rent payments.
Landlord’s PAN card is compulsory for any HRA tax exemption exceeding Rs. 1 Lakh.
HRA exemption is allowed under Section 80GG of the Income Tax Act when your salary does not include HRA. Whereas, if your salary includes the HRA, then you can claim for tax deduction under Section 10 (13A).
Besides HRA, you can also claim other tax benefits* from life insurance policies.
As per Section 80C of the Income Tax* Act, premiums paid for any life insurance plan is eligible for a tax deduction.
Tata AIA Life Insurance offers a range of life insurance products to provide for all kinds of insurance seekers:
Term Insurance plans for pure protection and affordable life cover.
Savings solutions for the dual benefit of life cover and guaranteed1 returns on investments.
Wealth solutions for life cover, along with market-linked investment returns.
Retirement solutions to make the later innings of your life financially secured.
By submitting your details, you are giving your consent to receive SMS/Call by Tata AIA Life Insurance Company Limited or its representative, with reference to this solicited inquiry even though you may be registered on the DND list. L&C/Advt/2019/Jan/075
Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry
*Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.