#1: The HRA allowance you receive from your employer is not fully tax-deductible. It may be fully or partially exempt from tax.
The least of the following three is taken to be exempt from tax. The remainder of your HRA allowance is added back to your taxable salary.
- HRA received from your employer
- Actual rent paid minus 10% of Salary
- 50% basic salary for those living in metro cities (40% for non-metro cities)
#2: You can claim HRA by showing that you are paying rent to your parents
If you don’t live in a rented accommodation, but live with your parents, and are given HRA, you can still make use of this allowance.
For this though, your parents must be owners of the property you live in and must show this in their income tax return as rental income.
#3: HRA can be claimed directly on your income tax return
Forgot to submit the rent receipts to your employer at the time of proof submission? Well, you can still claim HRA while filing your income tax return. Adjust your taxable income to include HRA and recalculate tax on the lowered taxable income. If tax has been deducted in excess, you can claim a refund on the money.
#4: Landlord’s PAN is compulsory to submit if it exceeds Rs.8,333
A new notification from the Income Tax Department requires all tenants who pay rent in excess of Rs.1,00,000 per year to mention landlords’ PAN compulsorily in the income tax return. This is to deter landlords’ from hiding rental income in their income tax return.
#5: HRA is independent of home loan deduction
Homeowners paying back on their home loan and getting HRA as part of their salary can avail both the house property-related tax benefits to lower their taxable income.