People who live in rented homes and get paid a salary can use the House Rent Allowance (HRA) to lower their taxes, either partially or completely. This allowance is for the costs of renting a place to live. If you don’t live in rented housing, the full amount of this allowance is taxed.
What is House Rent Allowance, or HRA?
HRA is an income tax deduction for housing costs. It means that the part of the salary used to pay the rent can be subtracted from the taxable salary under Section 10. (13A).
Can I get HRA and a Tax Break for the Interest on my Home Loan?
Yes, you can claim the HRA because it doesn’t affect how much you can deduct for your home loan interest. Both points can be made.
Use our free hra calculator to find out if you are exempt from the HRA. This calculator shows you how much of your HRA you have to pay taxes on and how much is exempt from taxes.
When do you need the PAN of a Landlord?
If you are renting a house and paying more than Rs 1 lakh per year, you need to give the landlord’s PAN. If you don’t, you might lose the HRA exemption.
Circular No. 8/2013, dated October 10, 2013, says that landlords who don’t have a PAN must sign a self-declaration saying that they don’t have a PAN.
Tenants who pay rent to NRI landlords need to remember to take out TDS of 30% before paying rent.
What happens if I don’t get an HRA?
You can still get the deduction under Section 80GG if you pay rent for a residential accommodation but do not get an HRA from your employer. To get this deduction, you must meet the following conditions:
- You didn’t get HRA at any point during the year you’re claiming 80GG for.
- You, your spouse, your minor child, or a HUF in which you are a member does not own any housing at the place where you live, work, or run a business or profession.
- If you own a home other than the one above, you shouldn’t claim it as self-occupied. To get the 80GG deduction, the other property would be considered to be rented out.
Illustration
Mr Anwar works in New Delhi and is renting a place to live for Rs 15,000 per month during the Financial Year (FY) 2021-22. He gets a basic salary of Rs 25,000 per month, plus Rs 2,000 in DA, which is part of the salary. During the year, his boss also gives him an HRA of Rs 1 lakh.
Let’s talk about the part of the HRA that wouldn’t be taxed during FY 2021-22. Based on the information given, figure out 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 minus 10% of salary- Rs 1,47,600
Therefore, the entire HRA received from the employer is exempt from income tax in the above example.
Conclusion
Section 80GG provides a tax break for renters who do not get a housing rent allowance. To qualify for this deduction, the individual and his or her family members cannot own a home in the place of employment, company, or location where the individual normally resides, as well. Get some help from epf calculator and do all your calculations error free.
