House Rent Allowance (HRA): What is it?
Companies give their employees a specific stipend called the House Rent stipend (HRA) to help with the costs of their residential housing. This allowance is often tax-exempt and varies depending on where you live.The following situations will not qualify for tax exemption under the Income Tax Act of 1961:
- The home accomodation is owned by the employee or their spouse.
- The occupied accommodation does not cost the employee anything.
- The definition and consequences of the house rent allowance are now well understood. Let’s see what qualifies it.
Who can receive benefits under the HRA?
If an employee meets any of the following requirements, they will be eligible for HRA benefits:
- Employees of the Union Government are entitled to receive their House Rent Allowance at the government-specified amount.
- It can be drawn at the rates set by the State Government by anyone working for the State Government.
- A salaried person who pays rent and lives in rented housing.
- Let’s now examine the HRA maximum benefit limit.
What is the HRA maximum limit?
A number of variables, including inflation, employment type, job position, region, and many more, affect the maximum HRA limit. Nonetheless, HRA may not exceed 50% of the employee’s base pay.
Let’s now discuss the paperwork required to submit an HRA claim.
What paperwork is needed to submit an HRA benefit claim?
To be eligible for HRA benefits, an employee must have the following set of documents:
- Valid rental agreement: In accordance with income tax regulations, an employee must have a current renting agreement with the landlord.
- Rent receipts: In order to claim benefits and lower TDS on salaries, people must also present their receipts as proof.
- Pay rent through banking channels: Paying rent through banking channels provides documentation and aids in maintaining a record of all transactions.
- PAN of the landlord: It is necessary to provide the landlord’s PAN for rent payments that exceed one lakh per year.
How does the HRA exemption become determined?
The HRA exemption can be claimed for the lowest of the following under Section 10(13A) and Rule 2A:
- Received actual HRA
- A sum equivalent to 40% of the wage (if the house is in a non-metropolitan area) or 50% of the salary (if the house is in a metro area).
- Overpayment of rent (actual rent less 10% of base pay)
It’s also crucial to remember that salary is a fixed turnover % equal to basic plus commission (if it’s a part of retirement benefits) plus DA.
