If the individual owns any residential property at any place and earns rent from it then no deduction is allowed.
One can claim benefit of HRA under Section 10(13A) of the Income Tax Act, 1961 only when he is a salaried person who receives HRA from his employer.
In case of dearness allowance (if it forms part of retirement benefits) and commission received on the basis of sales turnover is applicable, these two are also included in the component of basic salary for the purpose of calculation of HRA Exemption.
The Income Tax Act, 1961 offers benefits on House Rent in two ways which can be categorised as follows:
A. HOW TO CLAIM HRA ?
One can claim benefit of HRA under Section 10(13A) of the Income Tax Act, 1961 only when he is a salaried person who receives HRA from his employer. HRA is exempt from income tax, subject to certain conditions which are as follows:
Rules for claiming exemption of HRA
Exemption shall be least of the following:
: In case of dearness allowance (if it forms part of retirement benefits) and commission received on the basis of sales turnover is applicable, these two are also included in the component of basic salary for the purpose of calculation of HRA Exemption.
Just to give you all a glimpse of HRA Calculation, here comes an example with proper calculation
Mr. X, an individual with a monthly basic salary of Rs. 15000, receives HRA of Rs. 7000 and pays Rs. 8400 rent for accommodation in a metro city. The tax rate applicable to Mr. X is 20% of his income.
Therefore, least comes out to be Rs. 82800. So, out of actual HRA received of Rs. 84000, 82800 gets tax exemption and the rest amount of Rs. 1200 gets add to the total taxable income of Mr. X, on which tax of Rs. 240(@ 20%) gets payable.
Note: HRA exemptions can be availed only on submission of rent receipts or the rent agreement with the house owner.
Note: It is mandatory for the employee to report the Pan Card of the 'landlord' to the employer if the rent paid is more than Rs 100000 annually.
A. HOW TO CLAIM 80GG ?
A self-employed individual/ person not claiming HRA can claim deduction under section 80GG for the deduction of rent paid.
Least of the following amount will be considered as deduction:
Adjusted Total Income means:
Total Income= XXXX
(-) Long Term Capital Gain= XXXX
(-) Short Term Capital Gain u/s 111A=XXXX
(-) Income u/s 115A or 115D=XXXX
(-) Deductions (80C to 80U except 80GG) =XXXX
Balance amount available= Adjusted Total Income
Note: While claiming a tax deduction, one must remember that the individual himself or his/her spouse, or minor child, or as a member of the Hindu Undivided Family (HUF) must not own any accommodation. Also, if the individual owns any residential property at any place and earns rent from it then no deduction is allowed.
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