Last Updated:July 05, 2025, 13:11 IST
If you want to claim HRA, you must be a salaried individual receiving HRA from your employer and living in rented accommodation.
Filing ITR with HRA: Save taxes with proper documentation.(Representative Image)
Are you a salaried individual looking to reduce your tax liability? House Rent Allowance (HRA) can be a valuable tool in your tax-saving plan. By claiming exemptions on rent paid, you can significantly lower your taxable income. Navigating the HRA claiming process can be complex. Here, we’ll break down the process, limits, benefits, and requirements for claiming HRA effectively, helping you make the most of this tax-saving opportunity.
Who is Eligible for HRA Exemption?
To qualify for HRA exemption, you must meet two key criteria: First, be a salaried individual receiving House Rent Allowance (HRA) as part of your salary package, and second, reside in rented accommodation.
Self-employed individuals or those not receiving HRA as part of their salary are not eligible for this exemption. To claim HRA, ensure you have essential documents like a valid rent agreement and rent receipts to support your claim.
How is HRA Exemption Calculated?
The HRA exemption amount is determined by taking the lowest of the following three calculations:
Actual HRA Received: The HRA amount received from your employer.
Percentage of Basic Salary: 50 per cent of your basic salary for metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40 per cent for non-metro cities.
Rent Paid Minus Threshold: Actual rent paid minus 10% of your basic salary.
Note that the basic salary includes dearness allowance, if applicable. The exemption amount will be the minimum of these three calculations.
Benefits of Claiming HRA
This is one of the most important things to understand! Claiming HRA reduces your taxable income, lowering your tax liability. For example, if you pay Rs 20,000 monthly rent and receive Rs 5,000 HRA, you can claim an exemption based on the above limits, potentially saving thousands in taxes annually. It encourages disciplined financial planning for salaried renters.
What are the Documents Required?
To claim HRA, you simply need:
Rent Agreement: A signed agreement with the landlord.
Rent Receipts: Monthly receipts with landlord details and payment proof.
Landlord’s PAN: Mandatory if annual rent exceeds Rs 1,00,000.
Form 16: Provided by your employer, detailing HRA received.
You have to keep these documents ready for ITR filing or in case of scrutiny by the tax department.
How to claim HRA benefits in your ITR?
Calculate Exempt Amount: First, you need to determine the HRA exemption amount based on the calculations outlined earlier.
Gather Documents: Then, collect essential documents, including rent receipts, rent agreement, and your landlord’s PAN (if applicable).
File Your ITR: Use the appropriate ITR form (ITR-1 or ITR-2) based on your income sources, and enter your HRA details under Section 10(13A).
Verify Accuracy: Ensure all information is accurate to avoid discrepancies during tax assessment.
Most e-filing portals will guide you through the process, prompting you to input your HRA details correctly.
Claiming HRA in your ITR can be a seamless experience if you’re well-versed in the eligibility criteria, exemption limits, and required documentation. By following the right steps and steering clear of common pitfalls, you can optimise your tax savings while staying compliant with tax laws.
For complex situations, you should consult a tax professional to ensure you’re meeting all the requirements and taking full advantage of the benefits available to you.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
- Location :
Delhi, India, India
- First Published:
#HRA #Tax #Benefits #Explained #Eligibility #Calculation #Documentation #Business #News
