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Tax Exemption: When it comes to tax savings, most people think of Section 80C of the Income Tax Act. However, there are many other sections under the Income Tax Act that can give you tax benefits. One of them is Section 10 (13A), under which you can avail tax exemption on House Rent Allowance (HRA). Let us know how:
A salaried person definitely gets House Rent Allowance (HRA). This is an important part of the salary. This helps in saving tax. However, it is necessary to pay rent for this. But, how can you avail House Rent Allowance without living on rent? But, how can this be claimed?
How to avail HRA?
House rent allowance is a major part of the salary. It plays an important role in saving tax. However, House Rent Allowance (HRA) has a limit and some important conditions. Tax benefits are available on HRA under Section 10 (13A) of the Income Tax Act. HRA comes under the ambit of tax exemption. This portion is subtracted from your total income before calculating gross taxable income.
You can also avail benefits like this
Self-employed people do not get this benefit. Even if you live in your home, you cannot take advantage of it. To avail HRA, it is necessary that you live in a rented house. Suppose you work in Delhi-NCR and you have to commute from your home to office, will you get the benefit of HRA? This is an important question.
Enjoy the benefits without renting
If you do not live on rent but live with your parents or a relative and have to commute to office from there, you still get the benefit of HRA. According to tax experts, if the house is in the name of any of your relatives like parents, then you can avail tax exemption on it. Parents will have to pay rent for tax exemption. For this, rent agreement and rent receipt will be required. However, the total amount of rent will have to be shown as the income of the parents. If he falls in the tax bracket then the rent amount will be added to his total income and he will have to pay tax on it. If they do not have any income then this will also be a source of income for them. In this way double benefit can be availed. The condition is that the house should not be in the name of the taxpayer.
How will the calculations be done?
There are 3 conditions regarding HRA.
1. It will be 40/50 percent of your basic salary. For metro cities (Delhi, Mumbai, Kolkata and Chennai) this limit is 50 percent and for non-metro cities it is 40 percent.
2. How much HRA is the company giving you?
3. How much rent have you actually collected – minus 10 percent of the basic salary.
Dearness allowance is also included in the calculation along with the basic salary, provided you are getting the benefit of DA. In the above three situations, the benefit of tax exemption will be available on the minimum amount.
