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Salaried individuals who have rented a house and comply with the rent deduction slab need to have correct HRA calculations to apply for exemptions. For metro city residents, 50% of the basic salary is exempted from tax slabs. For non-metro residents, 40% of the basic salary is exempted from the tax slabs. Also, if you receive HRA from an employer than it is exempt from taxes.
The House Rent Allowance amount which is to be paid to an employee is based on the Basic Salary. Other factors that act as the deciding ingredient for HRA amount is the city where the employee is stationed; in the case, for employees who reside in metro cities, an entitlement of 50% of the Basic Salary is the HRA percentage for other cities the percentage is 40% of Basic Salary.
To calculate the House Rent Allowance amount, components like the sum of Basic Salary, Dearness Allowances and any other commissions play vital roles.
The real HRA given to the employee will be the lowest of the following three allocations:
There will be no documentary proof required if your HRA claim is up to Rupees 3000 per month. If the claim amount exceeds the limit of Rupees 3000 per month then you will be mandated to produce certain documents as proof of accommodation payment.
The Rent Receipts: A fully filled Rent Receipt with the complete details of the residency address, landlord’s name, amount of rent paid, signature of the landlord verifying the payment acceptance etc. along with a 1 Rupee revenue stamp.
Rental agreement in some cases: If the monthly rental amount exceeds Rupees 15000 per month (Rupees 1,80,000 per annum) then PAN Details of the landlord should be produced mandatorily for claiming the HRA exemption.
If an individual pay for a home loan and he/she avails tax benefits for the loan, the individual can still benefit from the HRA allowance provided by the employer. This is applicable when the employee owns a property but has rented out that accommodation to someone else while he/she themselves occupy a rented accommodation belonging to someone else.
This allows the employee to earn from his own property while benefiting from HRA policy which eventually lessens his/her burden of paying rent for the accommodation he has occupied.
To get maximum possible deductions with HRA calculations, use our advanced calculating system. All you need to do is fill in the correct information accordingly in the given field and hit “Calculate” button. It will do all the calculations for you.
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