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How to claim HRA tax benefits
March, 11th 2016

If you are salaried, a lot of your taxes can be saved by claiming HRA exemption. This allowance is usually linked to your salary and rises with your income. You are eligible to claim HRA exemption if you live on rent & pay rent. Also HRA must be offered by the employer as part of your salary.

Common questions about HRA exemption –

• Do I need a lease agreement? You must sign up a lease agreement with the landlord. This agreement will have details of the accommodation on lease, period of lease and rent agreed. This document may have to be submitted to your employer.

• Why do I need rent receipts? To allow you exemption on HRA, it is mandatory for the employer to collect proof of rent payment. The employer will give you exemption on HRA based on these rent receipts. Your TDS shall be adjusted so you don’t have to pay tax on HRA and your final tax liability will be calculated accordingly. Usually, employers need receipts for 3 months or so.

• Do I need the PAN number of my landlord? If the annual rent paid by you is more than Rs 1,00,000, it is mandatory to obtain PAN of the landlord and report it to the employer to claim HRA exemption. In case the landlord does not have a PAN, you can ask for a declaration to this effect from the landlord with name and address of the landlord. And keep it safely in your records.

• I could not submit rent receipts in time. If you have not been able to submit rent receipts to your employer, don’t worry, as HRA exemption can be directly claimed in your income tax return. Find out the exempt portion of HRA. This exempt amount has to be reduced from your total taxable salary. The net amount is shown as your ‘income from salary’ in your income tax return. Do remember to keep rent receipts and lease agreement safely in your records, in case the assessing officer asks for them later.

• My landlord is not giving me rent receipts? In this situation you may not be able to claim HRA exemption, remember to agree about rent receipts with your landlord before taking the accommodation on rent.

• I was on rent for part of the year? You can still claim HRA for the months you were living on rent. For the remaining months tax shall be deducted on your HRA.

For those who do not get HRA

If your employer does not provide HRA benefit and you live on rent, you can still claim certain tax benefits. These are allowed under section 80GG of the income tax act. In Budget 2016, the maximum amount that can be claimed under section 80GG has been revised from Rs 2,000 per month to Rs 5,000 per month. (There is no additional tax save in Budget 2016 for those who are receiving HRA).

Section 80GG benefit can be claimed when
• You live on rent but do not get HRA
• You are salaried or self-employed or in business
• You do not own any house property which is treated as self-occupied property in your tax return
• Your spouse or minor child does not own a property where you live or work or carry on your business or profession

If you meet the conditions listed above the lowest of the following can be claimed as a deduction under section 80GG –
• Rs 5,000 per month (was Rs 2,000 until financial year 2015-16)
• 25% of total income*
• Actual Rent less 10% of total income*

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