HRA, Rental Housing Grant - Calculation, Tax Exemption and Tax Laws<br><br><p>A guide on how to claim an HRA exemption and save taxes</p>

How is Tax Exemption From HRA Calculated?

The amount deducted is less than the following amounts:

• The actual HRA has been approved
• 50% [of the DA's + basic income] for those living in big cities
• 40% [of the DA's + minimum wage] of those living in non-urban areas
• The actual rent paid less than 10% of the basic salary + DA

Can I Claim HRA and Deduction on Home Loan Interest?

Yes, you can apply for an HRA because it does not affect your mortgage interest rate. Both may be required. Try our free HRA calculator to determine your exemption from HRA. This calculator shows you which part of your HRA you should be taxed - that is, how much your HRA is taxable and non-taxable.

When Do You Need a Landlord’s PAN?

If you have rented a house and made more than Rs 1 lakh a year - remember to provide the PAN to the landlord. If not, you may miss the release of the HRA. Homeowners without a PAN should be willing to give you notice in accordance with Circular 8/2013 of 10 October 2013. Tenants who pay rent to NRI homeowners should remember to deduct 30% TDS before making a rent payment.

What If I Don’t Receive an HRA?

If you pay rent for accommodation but do not receive an HRA from your employer, you may still require a deduction under Section 80GG. Conditions to be met in order to claim this catch:

• Self-employed or earning
• You have never received an HRA at any time during the year you want 80GG
• You or your spouse or minor child or member of the HUF - you do not own any accommodation in your current area, do office work, or hire or do business or occupation.

If you own any property other than the above, you should not claim the benefit of that property as your own. Elsewhere it will be considered permitted to require 80GG downloads.

Illustration

Mr Anwar, employed in New Delhi, has taken up rental accommodation which he pays Rs 15,000 per month in FY 2020-21. He receives a basic salary of Rs 25,000 every month and a DA of Rs 2,000, which is part of the salary. She also receives an HRA of Rs 1 lakh from her employer during the year. Let's understand the part of the HRA that can be exempt from income tax during FY 2020-21. As for the data provided, read the following:

• HRA received - Rs 1 lakh
• 50% of basic salary and DA - Rs 1,62,000 (50% * (Rs 25,000 + Rs 2,000) * 12 months)
• Rent paid less than 10% of salary- Rs 1,47,600

Therefore, every HRA received by the employer is exempt from income tax in the example above.

How to Claim HRA When Living With Parents?

Let's understand this for example. Samiksha works for MNC in Bangalore. Although her company provides her with HRA, she lives with her parents in their home and not in a rented place. How can he use this grant? Samiksha can pay rent to his parents and claim the grant provided. He must make an employment contract with his parents and pay them monthly. In this way, Samiksha can do a good deed for his parents while saving taxes. Also, Samiksha's parents need to report their rent as income from their income tax returns . If some income is below the basic exemption limit or tax in the lower tax area, they can save tax on family income.

How to Claim Deduction Under Section 80GG?

The least of the will be considered as the deduction under this section:

• Rs 5,000 per month;
• 25% of adjusted total income*;
• Actual rent should be less than 10% of adjusted total income*

*Adjusted total income means total income minus long-term capital gain, short-term capital gain under Section 111A, income under Section 115A or 115D, and deductions 80C to 80U (except deduction under Section 80GG).