Tax exemption benefits: HRA comes under the purview of tax exemption. This part is deducted from your total income before calculating Gross Taxable Income.
Tax exemption: When it comes to tax savings, most people think of Section 80C of the Income Tax Act. However, there are several other sections under the Income Tax Act that can give you tax benefits. One of them is Section 10 (13A), under which you can avail tax exemption on House Rent Allowance (HRA). Let’s know how:
A salaried person definitely gets House Rent Allowance (HRA). It is an important part of the salary. It helps in saving tax. However, it is necessary to pay rent for this. But, how can you avail the benefit of House Rent Allowance without living on rent. But, how can it be claimed?
How to avail the benefit of HRA?
House Rent Allowance is a major part of the salary. It plays an important role in saving tax. However, there is a limit on House Rent Allowance (HRA) and there are some important conditions as well. Tax benefit is available on HRA under Section 10 (13A) of the Income Tax Act. HRA comes under the purview of tax exemption. Before calculating Gross Taxable Income, this part is deducted from your Total Income.
You can also get benefit like this
Self-employed people do not get the benefit of this. Even if you live in your own house, you cannot avail of this benefit. To avail the benefit of HRA, it is necessary that you live in a rented house. Suppose you work in Delhi-NCR and have to commute to office from your home, will you get the benefit of HRA? This is an important question.
Take advantage without living on rent
If you do not live on rent but live with your parents or a relative and have to commute to office from there, then also you get the benefit of HRA. According to tax experts, if the house is in the name of any of your relatives like parents, then you can take tax exemption on it. For tax exemption, rent will have to be paid to parents. For this, rent agreement and rent receipt will be required. However, the total amount of rent will have to be shown as the income of the parents. If he comes under the tax bracket, then the rent amount will be added to his total income and he will have to pay tax on it. If he has no income, then this will also be a source of income for him. In this way double benefit can be availed. The condition is that the house should not be in the name of the taxpayer.
How will the calculation be done?
There are 3 conditions regarding HRA.
1. It will be 40/50 percent of your basic salary. For metro cities (Delhi, Mumbai, Kolkata and Chennai) the limit is 50 percent and for non-metro cities it is 40 percent.
2. How much HRA is the company giving you.
3. How much rent have you actually deposited – minus 10 percent of the basic salary.
In the calculation, Dearness Allowance is also included with the basic salary, if you are getting the benefit of DA. The minimum amount in the above three conditions will get the benefit of tax exemption.
