HRA, Rental Housing Grant - Calculation, Tax Exemption and Tax Laws

A guide on how to claim an HRA exemption and save taxes

Paid people, living in rented housing, can apply for a House Rent Grant (HRA) to reduce their taxes - in part or in full. This fee is for rent-related expenses. If you do not live in a rented area, this grant is fully taxable. Please note that the rental tax exemption is not available if you select the new rental system from FY 2020-21 (AY 2021-22)

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19min

1. How is Tax Exemption From HRA Calculated?

The amount deducted is less than the following amounts:

  • The actual HRA has been approved
  • 50% [of the DA's + basic income] for those living in big cities
  • 40% [of the DA's + minimum wage] of those living in non-urban areas
  • The actual rent paid less than 10% of the basic salary + DA

2. Can I Claim HRA and Deduction on Home Loan Interest?

Yes, you can apply for an HRA because it does not affect your mortgage interest rate. Both may be required. Try our free HRA calculator to determine your exemption from HRA. This calculator shows you which part of your HRA you should be taxed - that is, how much your HRA is taxable and non-taxable.

3. When Do You Need a Landlord’s PAN?

If you have rented a house and made more than Rs 1 lakh a year - remember to provide the PAN to the landlord. If not, you may miss the release of the HRA. Homeowners without a PAN should be willing to give you notice in accordance with Circular 8/2013 of 10 October 2013. Tenants who pay rent to NRI homeowners should remember to deduct 30% TDS before making a rent payment.

4. What If I Don’t Receive an HRA?

If you pay rent for accommodation but do not receive an HRA from your employer, you may still require a deduction under Section 80GG. Conditions to be met in order to claim this catch:

  • Self-employed or earning
  • You have never received an HRA at any time during the year you want 80GG
  • You or your spouse or minor child or member of the HUF - you do not own any accommodation in your current area, do office work, or hire or do business or occupation.

If you own any property other than the above, you should not claim the benefit of that property as your own. Elsewhere it will be considered permitted to require 80GG downloads.

5. Illustration

Mr Anwar, employed in New Delhi, has taken up rental accommodation which he pays Rs 15,000 per month in FY 2020-21. He receives a basic salary of Rs 25,000 every month and a DA of Rs 2,000, which is part of the salary. She also receives an HRA of Rs 1 lakh from her employer during the year. Let's understand the part of the HRA that can be exempt from income tax during FY 2020-21. As for the data provided, read the following:

  • HRA received - Rs 1 lakh
  • 50% of basic salary and DA - Rs 1,62,000 (50% * (Rs 25,000 + Rs 2,000) * 12 months)
  • Rent paid less than 10% of salary- Rs 1,47,600

Therefore, every HRA received by the employer is exempt from income tax in the example above.

6. How to Claim HRA When Living With Parents?

Let's understand this for example. Samiksha works for MNC in Bangalore. Although her company provides her with HRA, she lives with her parents in their home and not in a rented place. How can he use this grant? Samiksha can pay rent to his parents and claim the grant provided. He must make an employment contract with his parents and pay them monthly. In this way, Samiksha can do a good deed for his parents while saving taxes. Also, Samiksha's parents need to report their rent as income from their income tax returns . If some income is below the basic exemption limit or tax in the lower tax area, they can save tax on family income.

7. How to Claim Deduction Under Section 80GG?

The least of the will be considered as the deduction under this section:

  • Rs 5,000 per month;
  • 25% of adjusted total income*;
  • Actual rent should be less than 10% of adjusted total income*

*Adjusted total income means total income minus long-term capital gain, short-term capital gain under Section 111A, income under Section 115A or 115D, and deductions 80C to 80U (except deduction under Section 80GG).

Frequently Asked Questions

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When can I apply for a tax exemption on rent?

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You may want to be exempt from the HRA tax in the event that you pay rent for your accommodation.


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How can I claim HRA exemption?

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You can apply for exemption from the HRA by sending your employer proof of employment receipts. Alternatively, you may want the HRA exemption yourself while you complete your tax return.


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I am a self-employed individual. Can I claim HRA exemption?

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A self-employed person cannot claim exemption from the HRA. Only a leading person who has an HRA share in his or her salary package can apply for exemption from the HRA.


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What is the tax liability in case my entire HRA is not tax-exempt?

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The employer deducts TDS for applicable HRA balance, tax-free balances.


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What is an HRA allowance, and how to calculate it?

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  • The HRA is a rental rental grant. Means a portion of the income earned from rent and approved as a deduction from Section 10 (13A) taxable income. HRA release is permitted at least below:
  • The actual HRA was found by an employee
  • .
  • 40% of non-metro city earnings or 50% incomes if the lease is located in major cities such as Mumbai, New Delhi, Kolkata, and Chennai
  • Real rent paid less than 10% of salary.
  • In the above figure, income will include the base, charity grants and fixed percentage percent of the commission.


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Who can claim HRA exemption?

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Leading employees who receive rent as part of a salary and rent may seek exemption from the HRA in order to reduce their taxable income in whole or in part.


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Leading employees who receive rent as part of a salary and rent may seek exemption from the HRA in order to reduce their taxable income in whole or in part.

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The rental rent received by an employee is partially or completely exempt from the conditions set out in Section 10 (13A).


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What are HRA and DA?

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  • The charity is part of a pay cut to cover living expenses for government employees, government employees and pensioners. Charity grants are calculated as a percentage of basic income to cover the impact of inflation.
  • The HRA is part of a salary paid by employers to pay an employee's rent. Exemption from HRA is permitted at least below:
  • The actual HRA was found by an employee
  • 40% of non-metro city earnings or 50% incomes if the lease is located in major cities such as Mumbai, New Delhi, Kolkata, and Chennai
  • Real rent paid must be less than 10% of salary.
  • In the above figure, income will include the base, charity grants and fixed percentage percent of the commission.


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How to claim HRA in the Income Tax Return (ITR)?

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The taxable portion of the HRA component must be included as part of ‘Salary in terms of Section 17 (1)’. The exempted portion of the HRA component must be added under the heading 's allowances up to the level of s / s 10' (to ensure that it is included in income from s / s 17 (1) 17 (2) 17 (3)). Please note that when you submit an ITR online with Clear, the software automatically completes the Form 16 section. In that case, verify the default amount for information on Form 16.


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How to claim HRA if not mentioned in Form 16?

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If the HRA is not mentioned in Form 16, it means that your employer has not given you a different part of the HRA. HRA u / s 10 (13A) may be required if the employer provides a separate component to the HRA. If not, you can apply for rent payable under Section 80GG.


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How to save HRA?

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The HRA can be demanded at the lowest of these three prices.

  • Real rental rent accepted
  • 40% (non-metropolitan area) or 50% (metro city) salary
  • The actual rent paid is less than 10% of the salary.

Please note that you can apply for an HRA if you live in your parents' home, as long as you transfer the rent to your parents. In this case, your parents will need to report this rental income to their income for tax purposes. If your parents earn less than the basic wage, they are not obligated to pay taxes. In addition, the HRA benefit can also be claimed if you are a homeowner and want to deduct a maximum payment of u / s 80C and interest deduction u / s 24. The reason for living in a rented house should be realistic and practical. The IT department can monitor this system carefully.


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What is an HRA certificate?

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An HRA certificate is a certificate issued by a government employee to claim rent due to inability to obtain government accommodation in accordance with the prescribed procedure.


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How to submit HRA proof for ITR?

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Documents such as rental receipts and rental agreements must be submitted to the tenant to apply for a deduction for rent. If the rent is more than Rs 1 lakh per year, the landlord's PAN must be submitted. Based on this evidence, employers will provide a deduction from the HRA on Form 16.


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How to declare HRA via Myitronline?

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While completing the return with Myitronline, you can directly upload Form 16. The information provided on Form 16 will be completed, including the release of the HRA. However, suppose you do not have a Form 16. If so, you can add an exemplified portion of the HRA as calculated in the Mytronline HRA calculator under the Income tabs> Expedited grants of point 2 under Section 10.


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How much HRA can be claimed without proof?

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The tenant compulsorily demands rent receipts as proof that he or she is requesting a mortgage deduction.


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What happens if HRA is not claimed?

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If you have failed to submit rental receipts and lease agreements to your employer during the submission process, you can apply for an HRA deduction while completing the ITR. If you miss the HRA requirement while submitting a refund, you can file an updated refund to correct the error before the end of the testing year.


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What is the maximum limit for HRA?

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In terms of Section 10 (13A), an employee may apply for a deduction from the HRA up to the actual portion of the HRA received from the employer.


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Can I claim both 80GG and HRA?

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No, people who pay rent but do not receive rent can apply for a deduction under Section 80GG. Also, a person, partner or children should not own property in the rented area where the deduction is claimed.


CEO Krishna Gopal

Krishna Gopal Varshney is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Myitronline.com. Myitronline is amongst the top emerging startups of Asia and authorized ERI by the Income Tax Department. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. ”

Krishna Gopal Varshney
Co-founder & CEO