CA Mohit Bansal

Introduction: 

If you are a Salaried Employee then you must know about the HRA. The Term HRA stands for House Rent Allowance. Generally every employee receives a HRA from their employers as part of his salary package, in accordance with terms and conditions of employment.

HRA is given to meet the cost of a rented house taken by the employee for his stay. Income Tax Act allows for deduction in respect of HRA paid to employees so that salaried assesse can get some relief in terms of Tax Savings.

Recent Developments:

Recently CBDT changes some law related to HRA. According to a CIRCULAR NO. 4/2020, Dated 16 January, 2020  issued by Central Board of Direct Taxes (CBDT), if annual rent paid by an employee exceeds Rs.1 lakh per annum, it is mandatory for the employee to report PAN of the landlord to the employer.

If your landlord doesn’t have a PAN, you have to make a declaration. According to the 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.

Also Read- Claiming HRA – What to do if landlord do not have PAN?

Some employee believes that Tax Saving on HRA shall be available on the Total Rent paid but this is myth. There is condition as per Rule 2A/Section 10(13A)

Conditions:

As Per rule 2A/section 10(13A) an ‘Employee’ who is in receipt of HRA can claim exemption, if he doesn’t live in his own house & pays rent in excess of 10%   of salary for his residence.

When HRA Exemption is not Available:

a) When the Assessee stays in his own house.

b) When Assessee doesn’t pay any rent.

c) When s/he doesn’t incur any expenditure towards rent.

d) When rent paid is less than 10% of salary.

There is always a Question which arises every mind that Whether HOME LOAN Tax Benefit & HRA can be claimed simultaneously.

 The tax benefits for home loan and HRA are two separate entities and have no direct bearing on each other. As long as you are paying rent for an accommodation, you can claim tax benefits on the HRA component of your salary, while also availing tax benefits on your home loan. This could be the case if your own home is rented out or you work from another city etc. However, you need to account for any rental income you receive from the property you own under income from other sources.

Also Read- Simultaneous Claim of Interest on Housing loan & HRA; Deduction of Housing loan Interest against Capital Gain

COMPUTATION OF SALARY FOR HRA

Salary=Basic Salary + DA for retirement benefits + Commission forming part of salary.

Taxable HRA

Amount received for HRA XXXX
Less: exemption u/s 10(13A) is minimum of the following;
1. Actual amount received XX
2. 50% / 40% of salary* XX
3. Rent paid less 10% of salary XX XX
TAXABLE HRA   XXX

*50% if employee resides in Delhi/Mumbai/Kolkata/Chennai otherwise 40%

Important Note:

As introduced in Budget 2020, if an individual assessee opt for concessional tax rate introduced in budget, then that person should forgone certain exemptions and deductions, House rent allowance is covered under that list. Hence, please keep in mind that if that assessee wants to opt for concessional tax rate then do not take advantage of HRA.

Republished with Amendments

Also Read- Download House Rent Allowance (HRA) Calculator

(Author can be reached at bmohit02@gmail.com)

Also Read:-

Claiming HRA – What to do if landlord do not have PAN

House Rent Allowance – Case Study and Provisions

Download House Rent Allowance (HRA) Calculator

House Rent Allowance (HRA) Taxability & calculation

House Rent Allowance Vs. Rent Free Accommodations

Whats Better – House Rent Allowance or Deduction U/s 80GG?

HRA Exemption on maintenance Charges Paid Separately?

House Rent Allowance – A Tax planning tool for Salaried

House Rent Allowance – Deduction u/s. 10(13A) 

More Under Income Tax

9 Comments

  1. Anshul says:

    i am working in pune, and taken one flat on rent in pune @13K per month, but due to Covid situation i am working from my home town (Haryana), here also i have taken one flat on rent @ 17K Per month.
    So now i m paying rent for two House.
    So can i claim the rent under HRA for both the house or not?

  2. Lekhasekhara Naik says:

    Post retirement from Govt service I stayed in a rented house for 5 months (wef 01 Nov 2014 to 31 Mar 2015 at a cost of 8500/ per month i.e total Rs 42,500/-.How much I can claim in HRA and what procedure to be followed to claim the rebate.

  3. Anurag says:

    I’m working in bangalore and paying rent in bangalore as well as Delhi (My wife and kid stays there).

    Since the rent paid in Delhi is high, can i claim the HRA for Delhi flat instead of Bangalore.

  4. PATEL INT. LOG. says:

    If I have rented house at some other city where my family and parents stays and I am staying near my office which is in different city for which I am paying rent.
    Can I claim both rent amount clubbed together while claiming HRA exemption ?

  5. K M Mathew says:

    I stay in my own house and pay society charges – why that amount cannot be reduced from from taxable amount.As of now there is no relief for HRA

  6. CA Mohit Bansal says:

    Mr. Satish,

    This is the biggest lapse on part of the circular asking assessee to submit PAN of landlord. In practical, no landlord wants to give his PAN to tenant and hence tenant has to face these difficulties in availing exemption. Its unfortunate to suggest but you have no other option but to ask your landlord for his PAN otherwise you can not show rent more than Rs. 1Lacs

  7. CA Mohit Bansal says:

    Mr. Sanjay,

    Case 1: No! HRA exemption can not be claimed for the house occupied by father and mother. Sec 10(13A) specifically says that “occupied by assessee”. Hence you can claim HRA only for the house in which you are residing

    Case 2: You can claim exemption for only one house.

  8. sanjay says:

    sir
    if the employee is working in different city and paying rent for his father and mother house in other city . can HRA be claimed.

    and can HRA be claimed for 2 houses one in working city and the other in home city when he comes in week end.

    please give ur view.

  9. Satish says:

    As regarding HRA claim if the total rent crosses 1 lacs then the employee has to submit the Pan number of his owner,there are certain cases where employees were paying rent more than 1 lacs but his owner neither give his pan number nor give the declaration for not having pan number then in such cases what employees has to do, whether he can cliam the rent more than 1 lacs by submitting the rental agreement proof or he has to restrict his rent to 1 lacs even though he is paying more than one lacs please suggest me.

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