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HRA Exemption – How to claim HRA during filing ITR

Most salaried individuals get confused when it comes to claiming exemption on one’s House Rent Allowance (HRA) while filing tax returns. It is now easier to claim HRA exemption- you just need to copy details from Form-16 and paste them in ITR-1. It is important to know that you can claim for HRA exemption benefit only when you are living in a rented house. If you lives in your own house then you cannot avail tax exemption benefit on HRA.

Must Read: Important facts – House Rent Agreement

House Rent Allowance (HRA) is one of the most commonly received allowances by the salaried class. If you are paying rent for accommodation to a landlord which can mean your parents also, then you are eligible to claim tax exemption for the rent paid. The employer deducts the HRA from his employee salary. During filing of ITR, you can view the HRA deduction in Part B of your Form 16.

HRA Exemption – ITR filing: How to claim HRA in tax return

In a departure from the previous year, this year ITR-1 is in sync with the Form-16 received by salaried persons from employers as a TDS certificate. Therefore, it is easier to claim the HRA exemption as you are required to copy the details from the Form-16 and paste it in ITR-1.

HRA Exemption - How to claim HRA during filing ITR

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If you have forgotten to submit the documents such as rent agreement or rent receipts to your employer, then worry not, as you can still claim the tax-exemption benefit available on HRA while filing your income tax return (ITR).

However, remember in such a case you will be required to manually calculate the amount of HRA received by you which is exempted from tax. To claim HRA, you need to have relevant documents with you. The supporting documents for this purpose would be rent agreement, rent receipts. If the amount of rent exceeds Rs 1 lakh per annum the PAN of the landlord is also necessary. In case the landlord does not have a PAN, a declaration to this effect should be obtained from him, along with his name and address details.

Do not claim false HRA while filing ITR

You should not file wrong information in ITR forms otherwise you may have to pay a penalty.

How to claim tax exemption on HRA?

(i) If rent agreement or rent receipts submitted to employer

If you have submitted rental agreement or rent receipts to your employer, then in such a case, the tax-exempt portion of HRA received by you can be seen in Form-16. It is possible that either the entire HRA received by you during the FY is exempted from tax or only part of it is exempted, depending on which of the conditions/criteria set down for claiming HRA exemption you meet.

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Remember while submitting rent agreement or rent receipts to your employer, you are also required to submit PAN of your landlord if the annual rent exceeds Rs 1 lakh.

If you are filing your tax return using ITR-1 on the e-filing website, then amount of HRA exempted from tax, if any, is likely to be pre-filled. It is advisable that individuals verify the pre-filled information with the available documents i.e. as mentioned in Part-B of Form-16.

In case these details are not pre-filled or you wish to file your ITR using the Excel utility, then in such a case, these details are to be reported as follows:

(a) Taxable portion of HRA

The taxable portion of HRA is already added under ‘Salary as per provisions in section 17(1)’ head. You are just required to copy the amount from the Part-B of your Form-16 and paste in the relevant section of ITR-1 form.

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The required information will be pasted in the ‘Salary as per section 17’ in ITR-1 form.

(b) Tax-exempt portion of HRA

The tax-exempt portion of HRA can be reported under the head, ‘Allowances exempt u/s 10′ in the ITR 1. From the drop down menu, select ’10(13) – Allowance to meet expenditure incurred on house rent’.

You are required to copy the tax-exempt portion of HRA from Part-B of Form-16 from the ‘Allowances exempt under section 10’ and paste it in the relevant box in the ITR.

(ii) If rent agreement or rental receipts are not submitted to your employer

In case you have forgotten to submit rent agreement or rent receipts to your employer, then in such a case, you are required to manually calculate the tax-exempt portion of the HRA received by you. This could be done because your employer has assumed that the entire HRA paid to you is taxable.

Suppose, you are living in a rented apartment in Delhi (metro city) paying a monthly rent of Rs. 15,000. You have forgotten to submit the rental agreement to your employer which has led to higher TDS deduction. Your monthly basic salary is Rs 50,000 and your employer is paying monthly HRA of Rs 20,000. This would mean that your in-hand receipt from your employer is Rs 70,000 per month.

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To claim the HRA exemption, you are first required to calculate how much of the allowance is taxable. The minimum tax exempt portion of HRA received will be calculated based on the following rules:

a) Actual HRA received (Rs 20,000 x 12 = Rs 2.4 lakh)
b) 50% of basic salary if living in metro or 40% for non-metro cities (Rs 50,000 x 50% x 12) = Rs 3 lakh
c) Excess of rent paid annually over 10% of basic annual salary [(Rs 15,000 – 50,000 x 10%)*12 = Rs 1.2 lakh]

The tax exempt portion of HRA comes out to be Rs 1.2 lakh whereas the balance Rs 1.2 lakh is the taxable part.

Once you have calculated the tax-exempt portion of HRA, you will have to claim this benefit by reporting in your ITR. Remember to choose the ITR form carefully as selecting the wrong one will lead to your return being termed as defective and you will have to file it again.

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