By Rajni Pandey | July 11, 2024
To claim HRA exemption, you must be a salaried individual living in rented accommodation. The HRA component must be a part of your salary structure, and you should not be residing in your own house.
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HRA exemption is calculated as the least of the actual HRA received, 50% of basic salary plus DA for metro cities (40% for non-metro cities), or the actual rent paid minus 10% of basic salary plus DA.
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To claim HRA, you need to provide rent receipts or a rent agreement. If the annual rent exceeds Rs 1,00,000, the landlord's PAN is mandatory.
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You cannot claim HRA exemption if you live in a house you own. The exemption is only applicable if you pay rent for your accommodation.
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You can claim HRA if you pay rent to your parents, provided there is a valid rental agreement and proof of financial transactions. However, HRA cannot be claimed if you pay rent to your spouse.
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HRA exemption is only available under the old tax regime. If you opt for the new tax regime introduced from FY 2020-21, you cannot claim HRA exemption.
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HRA can only be claimed for one rented house. Even if you have two rented houses in different locations, exemption is available for only one.
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It is advisable to pay rent through cheque or electronic transfer to maintain clear records. This helps in providing proof of rent payment if required by tax authorities.
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If the rent exceeds Rs 50,000 per month, the tenant must deduct 5% TDS under Section 194IB of the Income Tax Act and deposit it with the government.
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