HOUSE RENT ALLOWANCE UNDER SECTION 10(13A) RULE 2A
Payment in cash by the employer to the employee for a specific purpose is called allowance. A salaried individual can claim house rent allowance only if he is residing in a rented house. If you don’t live in a rented accommodation then this allowance will be fully taxable.
House rent allowance is exempt to the extent of the least of the following:
(i) House rent amount actual received
(ii) Actual rent paid less 10% of Basic salary + DA ; or
(iii) 50% of (basic salary + DA) for those living in metro cities and 40% for non metro
Let us understand this by taking an example:
Example: Mr. Sonu is employed in Mumbai receiving basic salary of Rs. 20,000 and dearness allowance which is part of the salary of Rs. 3,000 per month. He has taken up accommodation in Mumbai for which he pays rent of Rs. 8,000 per month during the FY 2019-20. He also receives house rent allowance of Rs. 1,20,000 from his employer during the year.
Exemption of house rent allowance shall be allowed to the least of the following:
(i) Actual HRA received = Rs. 1,20,000
(ii) [8,000 x 12 i.e. rent paid – 10% of (20,000 x 12 + 3,000 x 12 i.e. basic + DA)] = Rs. 68,400
(iii) 50% of (2,40,000 + 36,000) = Rs. 1,38,000
Maximum exemption shall be allowed Rs. 68,400
Taxable HRA shall be:
HRA received = Rs. 1,20,000
Exempt = (Rs. 68,400)
HRA Taxable = Rs. 51,600
FREQUENTLY ASKED QUESTION (FAQ)
Question1. Do I need to submit proof for HRA?
Answer: Yes you are required to submit rent receipt and rent agreement if rent paid per month is more than Rs. 3,000.
Question2. Can I claim HRA, if rent paid to parents?
Answer: Yes, your parents must be owner of that property .If property may be owned by one or more of your parents.
Question3. In which mode rent should be paid?
Answer: HRA can be claimed whether rent is aid in cash by net banking or by cheque however you must have proof of rent paid i.e. rent receipt.
Question4. Do I need to submit any document proof of landlord?
Answer: Yes but only in case rent paid exceeds Rs. 1,00,000 annually then you are required to submit PAN of your landlord.
Question5. Can I claim HRA of more than one house?
Answer: No, HRA can be claimed for one house only.
Question6. Can I claim deduction under 80GG?
Answer: Deduction under section 80GG can be claimed by a self employed or salaried individual who has not claimed HRA at any time during the year in which you are claiming deduction u/s 80GG.
Question7. Can both husband and wife claim HRA for the same house?
Answer: Yes both husband and wife can claim HRA but to the extent of their respective share.
Question8. Can self employed individual claim HRA?
Answer: An individual who is self employed cannot claim HRA, you can claim deduction u/s 80GG if you pay rent.