Tips to Claim HRA Exemption When Filing Tax Return

House Rent Allowance or HRA is basically a type of allowance that is granted from employers to employees on the basis of their salary. The main objective of HRA or House Rent Allowance is to provide employees with tax benefits as upon submission of valid documents pertaining to HRA, employees can easily avail of tax benefits. The decision on what should be the ideal HRA is solely at the discretion of the employer who takes into consideration certain factors for the same. So, let us understand exactly how to claim HRA exemption when filling income tax return. 

What is HRA?

House Rent Allowance is a type of allowance that is calculated on the basis of employee’s cost to the company or CTC. This is separate from the other allowances as mentioned in the CTC or the basic salary. As individuals can get tax benefits from HRA, so almost everyone takes the advantage of HRA. So, basically, if any employee is paying a rent for any property or accommodation or is paying rent to parents just for the sake of staying with parents, then both will be classified as House Rent Allowance or HRA. 

Furthermore, as the House Rent Allowance is directly dependent on the salary of an individual, it is important to understand that as the salary increases, so does the HRA. This also means that if the HRA is higher, so will be the tax benefits availed from House Rent Allowance. So, while filling the income tax return, it becomes important to detail all about the basic salary. There are other factors as well that affect the HRA, such as the city in which an individual is residing. For example, if an  individual is living in a metropolitan city, then the House Rent Allowance that is provided will be higher. Generally, the HRA in metro cities is 50% of the salary and for other cities, it is 40% of the salary. 

How to Claim HRA Exemption When Filing Tax Return

Here is how you can claim HRA exemption while filing income tax return:

• First, analyse the HRA exemption that can be claimed by you
• This tax exemption then needs to be stated while filing out the income tax return form. However, you should be very careful about which form should be used by you as a taxpayer, which generally is ITR-1. 
• Then, you will also be required to enter the complete breakdown of your salary, mentioning about the allowances that are exempted from tax calculation and other allowances.
• You also need to specify the total amount of HRA that is being claimed for tax exemption. Then, on the website of the income tax department, you also need to click on the “taxes paid and verification” tab. Under this menu, you will be able to enter “exempted incomes”, which will also consist of HRA, under the ‘other’s dropdown. 
• Finally, after specifying the HRA under this, you will be able to claim HRA exemption. 

Moreover, it is also important to note that employers also request for HRA claims before the end of fiscal year in form 16. If the employee fails to do so, then the employer is liable to deduct TDS. Also, if your house rent is more than 1 lakhs, then you also need to submit PAN card details of your landlord for getting HRA exemptions during filing claims. 

Take Away

Thus, HRA which provides benefits of tax savings must be claimed by all the salaried employees who are living in a rented accommodation. You can also contact your employer to know about the permissible House Rent Allowance that is laid out to you.

Also read: Tips to save income tax on home loan