House Rent allowance also provides for tax exemptions. The sections help the salaried person/individuals, and the self-employed people and also professionals, to make their rent expenditures cheaper, and more pleasing.
Salaries of the employees of both private and public sector companies are composed of some minor components as well. HRA or the House Rent Allowance is one of the parts of the salary. HRA can be fixed or can be derived through a special agreement between the employee and the employer.
As the name proposes, the House Rent Allowance is given to an employee when he or she lives in rented residential premises and is only provided when the employee stays at a residence that he or she doesn’t; own.
HRA for Self Employed
The self-employed can also claim deductions and exemption. They can claim the benefits under Section 80 GG. This Section also is used to claim the HRA tax exemptions by the salaried employees when they do not receive any HRA.
HRA Tax Exemption for the Salaried Individuals
Section 10(13A) provides for HRA exemption. The deduction will be the lowest amongst:
1. Actual HRA received
2. The actual rent that is paid by the employee – 10 % of his/her salary
3. 50% of the employee salary is eligible for HRA tax exemption if he or she lives in any of the Metro cities of India (i.e. metropolitan cities of India including Delhi, Mumbai, Calcutta, and Chennai) or
In other cases, 40% of the salary can be HRA exempted
Documents required to Claim the HRA – Tax Exemptions
The employee will have to provide the following documents, in case claim, or the tax exemptions related to the HRA. If the rent paid during the given financial year is greater than one Lakh rupee, the employee will have to provide the PAN card details and copy of the landlord/property owner to claim the HRA tax exemption. The rent receipts required if rents paid by the employee. The details of the receipt include:
1. Date Name of the lessor Name of the tenant
2. PAN card details of the owner Address of the rented accommodation Duration of stay
3. A revenue stamp
4. Signature of the lessor, on the revenue stamp
Conditions to be Fulfilled for Claiming Tax Exemptions Related to HRA
The HRA exemption under Section 80, or other sections, is only provided to an employee when pays the rent. There is no exemption if the rent is not paid. When there is a change in the job place or a change in the salary, the HRA tax is calculated monthly basis. Hence the deductions or exemptions also vary for the periods of change separately.
HRA Tax Exemptions on the Rent Paid, Under the Section 80 GG
Section 80 GG of the Income Tax Act provides for the tax exemptions, for the expenses that are made towards the House Rent. But the HRA exemptions are available to the employee only when he or she has not claimed the deduction under any other section of the IT Act. the employees who do not receive the HRA (House Rent Allowance) can claim the HRA tax exemptions for the expenditures that they make towards paying the house rent under this Section of 80GG.
Other Conditions Related to Section 80 GG
HRA only available to the HUF and the individuals. Both self-employed people and salaried employees can claim rent-related deductions if they do not receive any tax exemptions under Section 10(13A).