If you have recently shifted to another city due to your new job, it would be tough for you to digest the fact that a big part of your salary is going to be consumed by your house rent. However, you can easily lessen this burden by using the benefit of HRA - a major component of your salary. HRA is an important part of any individual’s salary structure and the good thing is that it’s not entirely taxable unlike the basic salary.
Under a specified set of rules and regulations, a part of House Rent Allowance is exempted under section 10 (13A) of the IT (income Tax) Act. You need to understand that HRA is meant for those salaried or self-employed individuals who live in a house which is not owned by her/him.
Self-employed individuals can also claim HRA benefits under the section 80GG. Even salaried employees, who don’t receive any HRA, can claim the benefits of the said component under the section 80 GG.
How Much HRA can be Eexempted?
The deduction for HRA exemption under the IT Act Section 10-13A includes:
A person can avail the benefits of HRA on his home loan as well as rented residence.
What if an individual’s home is rented to someone else and s/he has to live in a rented accommodation? In such scenarios, the employee will have to denote her/his income that s/he has got from the property (the home loan property) and also pay the taxes due for it.
However, if both of the properties are in the same city- to claim the benefits on both of the properties- the employee will have to show that her/his job location is far away from her/his owned property and hence s/he can’t use it as his residence. Then only, he will be able to claim her/his tax exemption.
As a tax saver, it’s important for you to know the correct way of claiming HRA rebate as submitting fake documents can put you more in trouble than making it easier for you. As per latest judicial announcements, your tax assessing officer has full right to check the genuineness of the documents submitted by you for the HRA claiming.
The enlisted points below, will not only help you appreciate the benefits of legitimate tax exemption from House Rent Allowance but will also save you from future notices or penalty from IT (income Tax) department (which you can get for submitting fake documents):
Now when you know how to save taxes on House Rent Allowance, it is time to put the learning into practice and start saving your hard-earned money from getting depleted at the time of taxation.