Income Tax return filing: How to ensure that your HRA claim isn't rejected
Income Tax return filing: The financial year is almost over and the tax season is now well and truly here. The few days left in March offer the last opportunity to save on your hard earned money, else you will lose a big chunk of your money to the taxman.
Income Tax return filing: The financial year is almost over and the tax season is now well and truly here. The few days left in March offer the last opportunity to save on your hard earned money, else you will lose a big chunk of your money to the taxman. Among other tax saving options, HRA or House Rent Allowance allows salaried individuals who live in a rented house to lower their taxes. The amount claimed under HRA can be partially or completely exempt from taxes. In case you don't live in a rented accommodation, this allowance is fully taxable. The amount under HRA is determined by the salary of an employee. Archit Gupta, Founder & CEO ClearTax told Zee Business Online that in case the rent paid is more than Rs 1 lakh in a financial year, PAN card details of the landlord have to be submitted along with the claim.
How is HRA calculated?
House Rent Allowance is decided on the basis of salary. It is calculated keeping in mind factors like the city in which an employee lives. It is a part of your salary just like basic salary, dearness allowances and any other commissions. In case you are not getting dearness allowance, the HRA will be 50%/40% of the basic salary. The HRA offered is lowest of these three provisions:
- The amount received as the HRA from the employer.
- Actual rent paid less 10% of the basic salary.
- 50% of the basic salary if staying in a metro city and 40% in a non-metro city.
Watch this Zee Business video -
— Zee Business (@ZeeBusiness) March 18, 2019
How to ensure that HRA claim isn't rejected?
There are often cases when an HRA claim is rejected as the employees fail to furnish correct documents. In some cases, lack of knowledge is the reason behind it. Gupta lists a few Do’s and Don'ts to ensure that the HRA claim isn't rejected:
1. One must submit a valid rent agreement to the employer.
2. Rent payments should preferably be made via banking channels (helps provide an electronic trail of money). Avoid cash payments.
3. It is mandatory to furnish rent receipts to the employer for claiming HRA exemption.
4. Make sure to provide landlord’s PAN to the employer if the annual rent increases Rs.1 lakh
5. Make sure you physically reside in the house mentioned by you while claiming HRA.
The income tax benefit of house rent allowance is that it reduces your taxable income and eventually helps you save a huge amount of money.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.