55 mins ago
Can You Claim HRA for Rent on Multiple Properties?
House rent allowance, or HRA, can reduce some employees’ taxable income under the old tax system.
To get the exemption, an employee must pay rent for a home they actually live in.
Paying rent for a second home where their parents live does not count for the employee’s HRA exemption.
Someone living in their own home without paying rent cannot claim the exemption either.
The new tax system does not allow this HRA exemption.
The amount that can be exempt depends on HRA received, rent paid, salary, and the home’s location.
The exemption is the smallest of three amounts set by tax rules.
The article says taxpayers report the calculation in Schedule 10(13A) of applicable ITR forms.
HRA exemption is available only under the old tax regime; under the new regime, the full HRA is taxable.
Section 10(13A) allows an exemption for rent paid for residential accommodation the employee actually occupies.
Rent paid for a separate home where the employee’s parents live does not qualify for the employee’s HRA exemption.
Employees living in a home they own and paying no rent cannot claim HRA exemption.
The exempt amount is the least of actual HRA, rent minus 10% of salary, and 50% or 40% of salary depending on the city.
- Who
- Salaried employees receiving house rent allowance.
- What
- HRA exemption generally applies only to rent paid for a residential home the employee occupies, not a separate home for parents.
- Where
- For rented residential accommodation; the calculation distinguishes metro and non-metro locations.
- When
- When filing an income tax return under the old tax regime.
- Why
- The exemption is intended to help meet rental costs for the employee’s occupied home.
HRA exemption eligibility
Limits on HRA exemption
Rent paid for parents’ home
HRA exemption eligibility
An employee may pay rent for both their own home and a separate home where their parents live.
Limits on HRA exemption
The article states that HRA exemption applies only to the home the employee actually occupies, so rent for the parents’ separate home does not qualify.
Choice of tax regime
HRA exemption eligibility
Employees under the old tax regime may claim an eligible HRA exemption.
Limits on HRA exemption
Employees under the new tax regime must pay tax on the entire HRA received.
Key facts
- Relevant provision
- Section 10(13A) of the Income-tax Act
- Tax regime
- HRA exemption is available only under the old tax regime.
- Eligible accommodation
- Residential accommodation rented and actually occupied by the employee.
- Exemption calculation
- The least of actual HRA received, rent paid minus 10% of salary, and the applicable salary percentage.
- Metro-city limit
- 50% of salary for Mumbai, Kolkata, Delhi, or Chennai.
- Other-location limit
- 40% of salary for non-metro locations.
- Return schedule
- Schedule 10(13A) in ITR-1 or ITR-4, as applicable.
Quotes
Income tax department
The government department responsible for administering income tax in India.
“House Rent Allowance is paid by the employers to the employees to meet the cost of rented house taken by them. The Income-tax law allows exemption up to certain extent in respect of the HRA if employee pays rent for the house which he actually occupies.”
livemint.com
Sources
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