With the IT Return filing date for individuals and HUF is round the corner, it is all the more important to understand exemption available on payment of house rent. House Rent Allowance (HRA) is most common part of the salary for employees. In order to claim house rent exemption benefit, one has to live either in a rented house or pay rent to parents. In the current year return, salaried employees are required to furnish break-up of the salary and perquisites in the form of different components.
While employer provides you house rent exemption basis your submission of rent agreement and/or rent receipts. However, if you have missed submitting required documents to the employer for getting house rent exemption then also, you can claim it at the time of filing of IT Return. If the annual rent payment exceeds Rs 100,000/- then IT department could ask you to furnish PAN details of the landlord. In case you are paying rent to the parents, it is advisable to route it through Banking channel and these payments get reflected in their ITR as well if their annual income is beyond threshold. You will have to keep supporting documents as proof of payment. Please remember to enter tax exempt portion of the House Rent Allowance under section 10(13A).
In order to illustrate house rent exemption calculation part, one need to know/get Basic Salary and House Rent Allowance portion of the total salary from the pay slip. Assuming annual basic salary of Rs 120,000/-; HRA of Rs 8,000/- p.m. and house rent payment of Rs 10,000 p.m., the minimum tax exempt portion of house rent would be calculated as follows:
A. Actual component of annual HRA received from employer 8,000/- X 12 = Rs 96,000
B. Depending on the place of stay exemption would vary(Metro 50% or Non-metro 40% of Basic):-
Metro City 50% of Basic = 120,000 X 50% = Rs 60,000
Non-metro city 40% of Basis = 120,000 X 40% = Rs 48,000
C. (i) Excess of annual rent paid over 10% of the Basic i.e. 10% of Rs 120,000 = Rs 12,000
(ii) Actual rent paid Rs 10,000 X 12=120,000; therefore (ii) - (i) =120,000-12,000 =Rs 108,000
The tax exempt portion of HRA would be least of A, B & C; therefore Rs 60,000/- would be exempt portion if you are staying in metro city otherwise Rs 48,000/- for non-metro city.
Provision for employees not getting House Rent Allowance from the employer:
If tax payer is not in receipt of House Rent Allowance from the employer and he or spouse or dependent children or HUF, if any, do not own residential accommodation at place of work, business or profession then he is eligible to claim rent exemption under section 80GG subject to least of the following:-
(i) 25% of the total income of the taxpayer before deduction for any expenditure, in case of business or profession. For employees not receiving HRA this will be subject to excess of rent paid over 10% of the basic salary.
(ii) Amount of Rs 5,000/- per month or Rs 60,000 per annum.
Keep watching this space for more updates on taxation aspects!
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