Income Tax Tips: How can one claim a House Rent Allowance without living on rent?
House Rent Allowance: If you work, you get House Rent Allowance (HRA). This is an important part of the salary. This helps in saving tax. However, for this, it is necessary to pay rent. But, how can you avail the benefit of House Rent Allowance without living on rent? How can it be claimed? To understand this, the entire process has to be understood.
How to get the benefit of HRA?
House Rent Allowance is a major part of the salary. It plays an important role in saving tax. However, there is a limit regarding House Rent Allowance (HRA) and there are some important conditions as well. The tax benefit is available on HRA under Section 10 (13A) of the Income Tax Act. HRA comes under the purview of tax exemption. Before calculating Gross Taxable Income, this part is subtracted from your total income.
This is also how you get the benefit of HRA
Self-employed people do not get this benefit. Even if you live in your home, you cannot take advantage of this. To avail of the benefit of HRA, you must live in a rented house. Suppose you work in Delhi-NCR and have to commute from your home to the office, then will you get the benefit of HRA? This is an important question.
You can avail of benefits without living on rent
If you do not live on rent but live with your parents or a relative and have to commute to the office from there, you can still avail the benefit of HRA. According to tax experts, if the house is in the name of any of your relatives like your parents, then you can avail of tax exemption on it. For tax exemption, parents will have to pay rent. For this, a 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 comes under the tax net, 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 benefits can be availed. The condition is that the house should not be in the name of the taxpayer.
How is the calculation done?
There are 3 conditions regarding HRA.
1. This will be 40/50 percent of your basic salary. The limit is 50 percent for metro cities (Delhi, Mumbai, Kolkata, and Chennai) and 40 percent for non-metro cities.
2. How much HRA is the company giving you?
3. How much rent have you deposited – minus 10 percent of your basic salary?
Dearness Allowance is also included in the calculation along with the basic salary if you are getting the benefit of DA. The benefit of tax exemption will be available on the minimum amount that is met in the above three conditions.
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