If you are wondering whether you need to submit proofs for house rent allowance, then you have come to the right place. Read on to know!
HRA stands for housing rent allowance in the context of income tax. It refers to the salary component of the rent payment that is authorised as a deduction from taxable salary under Section 10. (13A).
Hra tax exemptions is calculated by these elements such as
- Actual HRA received
- 50% of [basic salary + DA] of those living in metro cities
- 40% of [basic salary + DA] of those living in non-metros
- Actual rent paid should be less than 10% of basic salary + DA
In this blog,we will discuss how house rent allowance is determined in India and whether or not supporting proof is required for claiming house rent allowance.
Do we need to submit proof for claiming House Rent Allowance?
If a person had a house rent allowance as part of their salary structure and had paid rent in FY 2021–2022, they could save taxes. One can also use an online HRA calculator to determine HRA tax exemption.
- One needs proof of the rent paid during the financial year in order to avoid paying tax on house rent allowance. Rental agreements with the landlord or rent receipts that have been received can serve as proof.
- One must give the employer proof of their rent receipts or rental agreements in order to have less tax deducted from their pay income.
Your Form 16 will show the tax savings on the house rent allowance you received. You can still claim a tax exemption on your house rent allowance when you file your ITR even if you failed to give your employer proof of your rent payment.
How does one obtain an HRA tax exemption when filing an ITR?
(i)If the landlord receives the rental agreement or rent receipts
You must provide your employer with rent agreements or rent receipts in order to reduce the TDS on your salary income. If you choose to use the previous income tax system for the purposes of TDS on salary, you will be eligible for the house rent allowance tax exemption.
The employer will determine how much of the house rent allowance is tax-exempt after receiving the proof. Form 16 shows the tax exemption that is available to you.
Depending on which of the conditions/criteria specified for claiming house rent allowance exemption you meet, the HRA you received during the FY 2021–22 may be exempt from tax in its entirety or only in part.
Keep in mind that if your annual rent exceeds Rs 1 lakh, you must also provide your employer with your landlord’s PAN along with your rent agreements or receipts.
According to section 17(1)’s provisions, the taxable component of your house rent allowance will be added to your compensation under the heading “Gross Salary.” The tax-free element of the HRA, however, shall be displayed separately under the heading Allowances to the extent exempt under section 10.
The amount of house rent allowance that is exempt from tax, if any, is likely to be pre-filled when filing a tax return using ITR-1 on the website for electronic filing. It is advised that people double-check the pre-filled information with the relevant papers, such as those included in Part B of Form-16.
However, the following is how to fix a mistake or details that are not pre-filled due to bugs on the income tax portal:
(a) HRA’s taxable part
As was already noted, the taxable element of the HRA has been listed under the heading “Salary as per Section 17(1) Provisions.” Simply duplicate the amount from your Form-16’s Part B and put it into the appropriate field on the ITR-1 form.
The ITR-1 form’s “Salary as per Section 17” section will be updated with the necessary information.
- b) The HRA’s tax-exempt portion
The ITR 1 will list the tax-free portion of house rent allowance under the heading “Allowances exempt u/s 10.” Choose “10(13A) – Allowance to offset expenses incurred on house rent” from the drop-down box.
You must copy the house rent allowance’s tax-exempt portion from Part-B of Form-16’s “Allowances exempt under section 10” section and paste it into the appropriate field in the ITR.
If your employer is not given the rental agreement or rental receipts You will need to manually compute the tax-exempt portion of the house rent allowance you got if you intend to switch to the old tax system at the time of filing your ITR or if you have not provided your employer with documentation.
This is so because your company believes the entire house rent allowance payment you received is taxable.
How to Calculate the Tax Exemption on House Rent Allowance
Imagine that your monthly rent in Bangalore is 15,000 rupees. Your base salary for each month is 70,000 plus a 20,000 health reimbursement allowance. In this case, your house rent allowance exemption cap will be established as follows:
- Actual paid HRA = ₹2.4 lakhs (annually)
- base wage 50% = ₹3 lakhs
- Extra rent that was paid each year that is greater than 10% of base wage = ₹1.2 lakhs
- The HRA is exempt up to 1.2 lakhs, with the additional 1.2 lakhs subject to tax.
- Once you are aware of the HRA claim amount, use the appropriate ITR form and submit your ITR by doing the following:
Enter your salary in Form 16 – Part B’s “Salary as per requirements specified in section 17(1)” field. The HRA as previously established must be reported in the ITR 1 under “allowances exempt u/s 10.”
If you follow these house rent allowance tax exemption rules, you can easily claim your HRA exemption while filing your ITR reports.
Making use of an house rent allowance exemption is a great way to reduce your taxable income each year. In addition, investing in savings insurance, retirement annuity plans, and insurance plans can be profitable.
What is an HRA calculator?
The amount of your HRA tax exemption can be calculated for you by a number of websites and services available online. It is quick and simple to calculate this tax-deductible component in India using online house rent allowance calculators.
In Hra calculator online, you have to enter your salary information so they can calculate your HRA. By doing so, you can ensure that the house rent allowance formula is accurate.
Your HRA exemption may be calculated accurately and easily in India using Vakilsearch’s house rent allowance calculator.
How to Use Vakilsearch HRA Calculator?
The simplest method to determine your house rent allowance exemption is to use the Vakilsearch HRA calculator online. You can accurately calculate your income tax liability in 3 simple steps and find out how much HRA you can exempt from paying.
- Add your base wage, dearness allowance (if applicable), house rent allowance that you received from your employer, and the actual annual rent that you pay.
- Select if you reside in a metro or non-metro city.
- To determine how much of your house rent allowance is tax-exempt and how much of it you must pay in taxes, click the Calculate option.
Conclusion
We hope that after reading the information above, it is clear that providing proof of hra is not necessary, but the income tax department may request it in certain circumstances. For this reason, one should always keep proof of hra exemption on hand.
For calculating HRA amount you can use an HRA calculator online by Vakilsearch. This tool will solve all your problems in just a few clicks.
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