Tax deduction on house rent allowance (HRA)

Tax deduction on house rent allowance (HRA)

  • A tax exemption on house rent allowance (HRA) received is available under Section 10 (13A) of the Income Tax Act to individuals.
  • It is a deduction available to a salaried person who has an HRA component as part of his salary package and is staying in a rented accommodation.
  • The exemption for HRA deduction is the minimum of
  1. Actual HRA received,
  2. 50% of salary if living in metro else 40% and
  3. Excess of rent paid over 10% of salary.
  • HRA exemptions are only available on submission of rent receipts or the rent agreement with the house owner by the tenant.
  • The rented premises must not be owned by the person claiming the tax exemption. If you stay with your parents and pay rent to them then you can claim that for tax deductions.
  • If monthly rent is above Rs.8,333, landlord’s PAN is a must. Income Tax (I-T) Department now wants tenants to produce their landlord’s PAN for HRA exemptions of Rs 1 lakh or more annually or Rs 8,333 monthly.

What should you do if your landlord doesn’t have PAN?
If your landlord doesn’t have a PAN, you have to make a declaration. According to the Central Board of Direct Taxes (CBDT) circular, in case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee.

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