For workers who live in rental homes, the House Rent Allowance (HRA) represents a significant portion of their pay. Section 10(13A) of the Income Tax Act of 1961 provides tax relief and aids in lowering taxable income. You can save more money on taxes if you know how to claim HRA while submitting your income tax return (ITR).
What is HRA?
HRA is the money your company gives you to cover rent, it is part of your salary package. The best part is that HRA is not fully taxable, a part of it is tax-free. The tax-free amount is decided by three rules. The exempt amount is the lowest of these three:
- The actual HRA you get from your employer.
- 50% of your basic salary plus DA if you live in a metro city (40% for non-metros).
- Rent paid minus 10% of your basic salary plus DA.
The balance, if any, becomes taxable.
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Who Can Claim HRA?
Not everyone can claim HRA. Some conditions must be met:
- You should be a salaried employee and get HRA in your salary.
- You must live in a rented house and pay rent regularly.
- You cannot own the house you live in and still claim HRA.
- Self-employed people cannot claim HRA. But they can claim rent deduction under Section 80GG.
HRA Exemption While ITR Filing – Calculation Tips & Steps
Keep rent proofs ready – Collect rent receipts and the rental agreement. These should have the landlord’s name, address, rent amount, and payment date. If rent is more than ₹1 lakh a year, the landlord’s PAN is needed.
Calculate the exemption, and choose the lowest value using the three-rule procedure. Your HRA will be tax-free, and to prevent errors, you can also use online HRA calculators.
Verify Form 16: Your employer provides you with Form 16, which contains information on your pay, TDS, and HRA. Verify that the HRA value is accurate.
Enter details in ITR – Use ITR-1 or ITR-2, depending on your income. Fill in the HRA details under “Income from Salaries.”
Submit proof if asked – Normally, you don’t need to upload rent receipts when filing ITR. But the Income Tax Department may ask later. Keep all receipts and agreements safe.
Special Cases
Rent payment to family – If you pay your parents or siblings rent, you are eligible for HRA. However, the residence must be registered in their name.
Having a home in another city – You are still eligible for HRA if you own a home in one city but rent a residence in another city for work.
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Common Mistakes to Avoid
Many people miss out on HRA benefits due to small mistakes. If the annual rent exceeds ₹1 lakh and you do not provide the landlord’s PAN, your claim may be rejected. Presenting rent without legitimate invoices is another error that can result in tax department checks.
Claiming HRA in your ITR is easy if you follow the rules, just keep rent proofs, calculate properly, & correctly fill in the details. This will help you save tax and improve your financial planning. Avoiding errors will ensure you get the full benefit of HRA.
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