If you’re a salaried employee, your employer might ask you to fill out a declaration form to claim a House Rent Allowance (HRA) exemption. HRA is a benefit provided to salaried individuals to help cover rental accommodation expenses. It allows you to reduce your taxable income, lowering your tax liability.
How HRA Exemption Works:
The amount of HRA you can claim as an exemption is the lowest of the following:
1. Actual HRA received: This is the amount listed as HRA on your salary slip.
2. Rent paid minus 10% of salary: This takes into account your actual rent expenses minus 10% of your salary.
3. HRA limit based on city type:
– Metro cities (Delhi, Mumbai, Kolkata, Chennai): 50% of your basic salary plus dearness allowance (DA).
– Non-metro cities: 40% of your basic salary plus DA.
Documents Needed to Claim HRA:
To claim HRA deduction on your Income Tax Return (ITR), you might need the following documents:
1. Rent Agreement: A valid rent agreement for the current financial year, proving that you have rented accommodation.
2. Rent Receipts: Stamped rent receipts for the monthly rent payments made during the financial year. Even if you pay rent electronically, receipts are important.
3. Landlord’s PAN Card: If your total rent paid in a year exceeds Rs 1 lakh, you must submit a copy of your landlord’s PAN card to your employer to claim the HRA exemption.
4. Proof of Payment: Bank statements, online transaction receipts, or any other evidence showing the actual payment of rent.
Paying Rent to Family Members:
You can pay rent to family members and claim HRA, but you need to maintain proper documentation. If filing an ITR is mandatory for the family member, they should declare the rent received as income in their tax return.
Employee Declaration Form:
Your employer might require you to fill out a declaration form to claim the HRA exemption. This form typically includes details about the rented accommodation and the rent paid.
These documents are usually required to be submitted to your employer so they can deduct HRA and reflect it in your Form 16. However, you can still claim HRA when filing your ITR even if you didn’t claim it earlier.
This information is for general understanding. It’s advisable to consult a tax advisor for specific details and the latest regulations.
