HRA (It is the acronym for House Rent Allowance), this is a term that denotes house rent allowance and also gives tax exemptions. Well, if you are a working individual, you have got to know about it. There are a lot of things in your salary that you do not know about – which is not acceptable because you have to know everything about your salary, every bit and every piece. Knowing all of this helps you better understand your income and all of the benefits that come along with it.
You can then spend and live better when you know exactly what comes in your package. In this piece, let us learn about HRA. Something that you can benefit from by being a salaried person.
What is HRA?
The salaried individuals that live in rented houses can claim the house rent allowance to lower taxes, and it could be partially or wholly.
It is an allowance that is related to rented accommodation. If you do not live in a rented place, it is an allowance that is fully taxable. It is the salary component received towards the rent payment and is allowed as a deduction from the taxable salary.
How to Calculate HRA?
You can get the deduction in the following amounts:-
- HRA received
- 50% of the salary for people who live the metro cities
- 40% of the salary for the ones who live in non-metro cities
- Actual rent paid should be less than 10% of the salary
If you think you need to know more about the calculation of your own HRA, you can always use the HRA calculator Income Tax. This calculator will show you your HRA based on your salary.
Now, what are you thinking? Are you thinking about claiming HRA? If you are, you are at the right place, and there are certain rules that you need to know. And, do not worry, you will find all of the rules right here, without having to try too hard, but all you have to do is keep reading this article.
Rules for HRA Claim
1. Your HRA allowance cannot be more than 50% of your basic salary. You cannot claim the whole rental amount if you are a paid employee. Your exemption would be based on the least one of the following options:
2. The real amount allotted as HRA by the employer.
3. Actual rent paid less than 10% of the basic wage
4. If the employee lives in a metropolitan area, he or she will receive 50% of the base income (40 percent for a non-metro city).
5. HRA tax benefits can also be obtained in conjunction with a house loan.
6. If you live with your parents, you may pay rent to them and obtain a receipt for your HRA claim. Similar laws though, however, do not let you to pay rent to your spouse while claiming a tax exemption.
7. If the annual rent of your housing exceeds Rs.1,00,000, you must submit the landlord’s PAN card. In addition, if the landlord does not have a PAN card, he or she may make a self-declaration.
8. Another essential law is that if your landlord is an NRI, you must deduct 30% tax from the amount of rent that must be disclosed.
Carry the following documents along when you need to claim the tax exemption on HRA.
Documents that you Will Need
Rent receipts to the rental agreement are the key document that must be given when seeking tax exemption for HRA. You will be qualified for this exemption as a taxpayer even if you pay rent to your paramour.
To qualify for HRA tax exemption, you must submit your rent receipts as the taxpayer. In cases where the annual rent of the dwelling unit exceeds Rs.1 lakh, the landlord’s/PAN landlady’s details must also be submitted.
If the landlord/landlady does not have a PAN card, he or she can offer a self-declaration including the same information.
You need to know that there are several perks to HRA; want to know them? Here we go.
Perks of HRA
A. The Info to Manpower Plans
HRA gives crucial information on the cost and value of human resources, and it shows the strength and weaknesses of human resources. All this data assists the managers in planning and making the right decisions about human resources. Therefore, it gives useful information for manpower planning and also decision-making.
B. Data to Make Personal Policies
HRA gives useful information for making suitable personnel policies about promotion, favorable working environment, job satisfaction or employees, and much more.
C. Utilizing the Human Resources
HRA, without a doubt, does help an organization to make the best use of human resources.
D. Better Morale
HRA demonstrates that the organization cares for its people and their well-being. This boosts their morale and pushes employees to work hard in order to attain the organization’s goals.
E. Development Programs
HRA assists the organization in designing (creating) an appropriate training and development program for its employees and managers.
F. Investor Information
HRA gives vital information to both current and prospective investors. They can utilize this information to choose the finest firm to invest in.
Conclusion
Here you have found everything you need to know about HRA. Now, you know you can easily claim it when you have all of the tips on your fingertips.