Missed Out on Claiming HRA After Changing Jobs? Here’s How to Save Tax While Filing Your ITR

HRA: Did you forget to submit rent receipts to your employer when you changed jobs last year? Don't worry; you can still claim the HRA exemption while filing your Income Tax Return (ITR). Learn the correct method for calculating HRA based on varying salary structures.

HRA: Changing jobs is a positive step for career growth, but amidst the hustle and bustle, we often forget to submit documentation regarding our investments and expenses. The most significant loss typically concerns the tax exemption available on the 'House Rent Allowance' (HRA). If you changed jobs three times within a single financial year—and your basic salary differed at each workplace—calculating your HRA can seem a bit complicated. However, the good news is that you can still save on taxes by opting for the 'Old Tax Regime.'

Didn't Submit Receipts to Your Employer? Can You Still Claim the Exemption?

Yes, absolutely! If you were living in rented accommodation and received an HRA component in your salary, you can directly claim the exemption while filing your Income Tax Return (ITR). You do not need to rely on your employer to facilitate this. Just keep in mind that this facility is available exclusively under the 'Old Tax Regime.'

A Month-by-Month Calculation Is Essential

Since you changed jobs three times during the year—and your basic salary and HRA amount varied with each change—you must perform a separate calculation for each individual month, rather than computing a lump-sum figure for the entire year.

Job 1: Determine the basic salary earned and the HRA received during that specific employment period.

Jobs 2 & 3: Perform similar, separate calculations for your subsequent jobs.

The total amount derived by aggregating these individual figures can then be declared as your 'tax-free' income.

3 Conditions for HRA Exemption

According to the Income Tax Department, the lowest of the following three amounts qualifies as tax-free income:

The total HRA amount received from your employer. 50% of your Basic Salary if residing in a metro city (40% in non-metro cities).
Actual rent paid annually – 10% of your Basic Salary.

How to Avoid an Income Tax Notice?

When you claim HRA in your Income Tax Return (ITR), your total ‘taxable salary’ will appear lower than the information provided by your employer (in Form 16). In such instances, the Income Tax Department may issue a notice seeking an explanation.

What Should You Do to Avoid This?

• Preserve Rent Receipts: Even if you have not submitted them to your employer, the Assessing Officer may request them at any time.
• Rent Agreement: You must possess a valid rent agreement.
• Bank Transactions: Endeavor to pay rent via bank transfer so that you have concrete proof of payment.
• Landlord's PAN: If the annual rent exceeds ₹1 lakh, providing the landlord's PAN number is mandatory.