House Rent Allowance (HRA) Taxability & Calculation

For Whom? – For people who get an HRA component in their salaries. It can be claimed by an individual tax payer or an HUF.

House Rent Allowance is given by employers to their employees to meet expenses if you are living in a rented space. HRA in salaries is claimed under section of income tax 10(13A). It can be partially or fully claimed based on your actual expense on rent which is claimed by submitting rent receipts or rent agreement with the owner.. If you get HRA in your salary and are not living in a rented space, the HRA component of your salary is fully taxable.

What is the amount that can be claimed? – Whichever of the below is lower can be claimed:

1. Actual HRA received.
2. 50% of (Basic + DA + commission received on the basis of sales turnover) in case of metros and 40% in case of non-metros.
3. Actual rent paid – 10% of Basic +DA.

All the figures above correspond to the amount of period of actual accommodation. i.e. if in a year you live in a rented space for 6 months, HRA received, basic, DA etc. for those 6 months would only be considered.

Things to know while claiming HRA:

1. PAN of the landlord is necessary if rent paid is over 1 lac a year or Rs. 8,333 per month. In case the landlord does not have a pan number he should give you a declaration stating the same.
2. If you pay rent to your parents, brother, sister in law, etc. you can claim HRA. Rent paid to spouse cannot be claimed here.
3. If husband and wife both share the rent paid, amount to the extent paid by each individually subject to the minimum amount that can be claimed, can be claimed by both.
4. HRA can be claimed, if you reside in a rented house in one city and own a house which is also let out in another city. But you should show income from your own house under income from house property. And if you have a home loan on such a house, you can claim the tax deduction for home loan while claiming HRA.
5. In case, due to some reason HRA was not claimed by you during the year, you can claim the same while filing income tax returns.