Jan 26, 2009

How to Claim HRA Tax Exemption - Tips & FAQs

First, let me clarify that for claiming HRA (house rent allowance) the correct word is EXEMPTION and not DEDUCTION. What’s the difference between exemption and deduction? Well, exempt portion of HRA is not considered as part of the taxable income whereas in case of deduction first the amount is included in your gross total income (GTI) and afterwards the deduction is allowed.

For example, while the persons drawing salary receives HRA , which gets TAX EXEMPTION under section 10 (13A) of Income Tax Act, 1961 read with rule 2A of Income Tax Rules ; the self-employed persons are entitled for TAX DEDUCTION under section 80GG of Income Tax Act, 1961.

Here we discuss some tips and frequently asked questions (FAQs) relating to HRA tax calculations and claiming exemption:


Calculating HRA Exemption

1. How to calculate HRA? Or, how much HRA is exempt from tax?
Please READ “How to Calculate HRA Income Tax Exemption”.

2. Whether HRA calculation to be done on monthly basis or annual basis?
There are four variables in HRA tax calculations: namely, salary (i.e., basic pay plus DA), HRA received, rent paid and the city of residence (whether metro or non-metro). In case all of the four remain the same through out the year, the HRA tax exemption calculation is to be done on ‘annual’ basis. On the other hand, if there is a change in any of the variable during the year then HRA tax exemption calculation is to be done on monthly basis.

3. What if the place/city of residence and place/city of working is different?
Good question. In such a case for the purpose of HRA calculation, place of residence will be considered and not place of working. Suppose that you’re working in a factory or a company located in Sonepat (near New Delhi) while residing in New Delhi. So, for the purpose of HRA, your maximum entitlement for tax purpose will be 50% of the basic instead of 40% because for metros HRA tax entitlement is 50% and for non-metros it is 40%.


Claiming HRA Exemption

4. How to Claim the maximum possible tax exemption on HRA?
Yes, indeed it is possible to claim the HRA tax exemption to the maximum extent possible as provided in the income tax law. For details, please read “How to Claim Maximum HRA Tax Exemption”.

5. How can a self-employed person claim tax benefit for the rent paid?
As the self-employed person doesn’t receive any salary, so there is no HRA and consequently question of HRA exemption – under section 10 (13A) of Income Tax Act, 1961 read with rule 2A of Income Tax Rules –doesn’t arise.

However, to take care of such a situation, there is a separate provision in the Income Tax Act, whereby a person not in receipt of HRA but incurring rent expenses for his residence can claim a deduction under section 80GG which is quite similar to section to 10(13A) but some additional conditions have been imposed.

6. Is it possible to claim HRA as well as home loan tax benefits?
Yes, certainly. There is no relationship between claiming HRA exemption and claiming interest deduction for housing loan. For details, please go to “4 Ways to Claim HRA exemption and House Loan Interest Deduction”.

7. What if the employer refuses to allow the HRA tax benefit?
Nothing to worry about. Just claim it while filing your return of income and get the refund of excess TDS deducted from your salary. But, first try to convince your employer and clarify his doubts, if any, regarding your eligibility for claiming it. If your case is indeed genuine, I don’t think your employer should have any problem in allowing HRA tax exemption.

8. Is it possible to claim HRA if residing in a relative’s (Parents/Spouse) house?
Please read "4 Ways to Claim HRA exemption".

9. Can both the working spouses claim HRA tax benefit separately?
Yes, Why not? If both of them are paying rent and landlord issues either two separate rent receipts or only one receipt specifying the amount or proportion paid by each, then both husband and wife are entitled for HRA exemption according to the amount of rent paid.


Submission of Evidence

10. What evidence needs to be submitted for claiming HRA?
The only evidence required for claiming HRA tax exemption is proof of rent payment (i.e., the rent receipt issued by the landlord). A lot many people think that you also require rent agreement for claiming HRA tax exemption but there is no such requirement in tax laws.

Furthermore, even the requirement of production of rent receipts have been dispensed with for the salaried employees drawing HRA (house rent allowance) up to Rs 3,000 per month. Please note that this relaxation is only for the purpose of TDS on salary and in the regular assessment, tax assessing officer has the power to ask for the relevant evidence, if deemed necessary.

Besides, please carefully note the above limit of Rs 3,000 is for the amount of HRA received per month and not for the amount of rent paid. For example, if you’re drawing a monthly HRA of Rs 4,000 p.m. but paying a rent of Rs 2,500 per month, you’ll have to submit the rent receipt for claiming HRA.

11. Can we submit rent agreement instead of rent receipt for claiming HRA?
Yes, if you wish you can submit the rent agreement but it can be in addition to and not instead of the rent receipt.

It’s quite possible that you’ve entered into a rent agreement but not paid the rent. The evidence of actual payment of rent is only the rent receipt and not the rent agreement. Thus, at present the only documentary evidence required for claiming HRA is rent receipt.

12. Whether PAN no. of landlord needs to be mentioned on rent receipt?
No, there is no such requirement under the tax law.

13. Whether all the 12 months rent receipts need to be submitted?
Absolutely not! The basic purpose is to satisfy the DDO that you’re actually paying the rent. It will suffice if you submit rent receipts for 2 months – one for the start of the financial year (i.e., April) and other one for the end of the financial year (i.e., March), or at the most 3 months (third one for the middle of the year).

14. Is there any particular format for rent receipt?
No particular format for rent receipt has been specified under the income tax law. However, a typical rent receipt can be as follows:

Received a sum of Rs ------vide cheque (no.-------dt------) or cash, being the rent for the month/period of ----- from Mr./Mrs.----- in respect of House no----(Mention complete address).

Date:-------
Place:------

Signature of
Landlord
(Name of Landlord)

It can also be in a different wording, but please ensure it mentions the following relevant information:

a) Amount of rent paid
b) Period/month
c) Mode of payment (Cheque/Cash)
d) Your name
e) Landlord’s name
f) Landlord’s signature
g) Residential address
h) Date & Place
i) A revenue stamp of Rs 1 for payment (both cash/cheque) exceeding Rs 5,000.

I hope that above tax planning tips and Faqs are able to answer your queries regarding calculating and claiming HRA income tax exemption. However, if you still have any doubts, or if there are any unanswered questions, please feel free to ask here in the comment box. I’ll try my best to clarify them.

Also See:

1. HRA Tax Calculator

2. How to Calculate HRA Tax Exemption

3. 4 Ways to Claim HRA with Home Loan Tax Benefits

58 comments:

  1. I was on job only for six months during FY08-09 and received HRA. But I paid rent for my own accommodation for the whole FY. Can I include the whole year rent in the calculation for HRA exemption under section 10 (13A)? If not, can I claim for deduction for rent paid during my unemployment period under Sec 80GG?
    ReplyDelete
  2. You can claim HRA exemption u/s 10(13A) only for first six months of the FY 08-09 during which you were employed.

    The deduction for the rent paid during next six months of FY 08-09 (the unemployment period) can’t be claimed even u/s 80GG because as per the condition mentioned under section 80GG of the IT Act, you should not be in receipt of any HRA during any part of the FY which may entitle you to deduction u/s 10 (13A).

    Section 80GG says, “In computing the total income of an assessee, not being an assessee having any income falling within clause (13A) of section 10, there shall be deducted any expenditure incurred by him in excess of ten per cent of his total income towards payment of rent…”.
    ReplyDelete
  3. Thank you for the quick response.

    Does the text of Sec 80GG refers to the whole FY or a particular month? I read in one of the articles that house rent deductions should be calculated month by month if there is a change in salary, does that apply here?
    ReplyDelete
  4. You’re unnecessarily confusing yourself.Please note that section 10(13A) and section 80GG are two completely different provisions under the IT Act and in your case only section 10(13A) is applicable.

    Regarding monthly / annual basis of calculation of HRA exemption u/s 10(13A) and rule 2A of IT Rules, please read FAQ no. 2 of this post carefully.
    ReplyDelete
  5. Hi, I am planning for leasing a house for about 5L for a period of 3 years. I am salaried and claims HRA. Can you please let me know the HRA calculation in this case or the related IT Acts/ Rules etc...

    Your help is highly appreciated.

    Best,
    Umesh
    ReplyDelete
  6. There are no different tax provisions or rules. Section 10(13A) read with Rule 2A is applicable in your case for calculating HRA tax deduction / exemption.

    If Rs 5 lakh is rent paid for 36 months (3 years), monthly rent works out to be Rs 13,889/- per month. Other parameters for calculating HRA are your basic salary, HRA received and city of residence.

    To know how to actually do the HRA tax calculation, click on relevant link given in FAQ 1. And if would like to take the help of calculator, please check out: ‘HRA Tax Calculator’ (Link given just above the comment section).
    ReplyDelete
  7. Thanks for the quick responce. Here the catch is at end of the contract, i.e. after 3 years owner will return the 5L. I am not sure of other places but this is one of the typical mode of leasing out the house here at Bangalore. So to summary, i pay 5L now and will get bcak 5L once the contract ( called lease period) of 3 years are over. In between I will not be paying any rent as such.
    Now how can I claim my HRA?

    Hope this helps to understand my problem better
    Your help is greatly appreciated.

    Best,
    Umesh
    ReplyDelete
  8. You need to forward a copy of the lease deed to my email: feedback@themoneyquest.com.
    ReplyDelete
  9. For the initial 6 months i was workin in one company and while moving to the other company i did not submit my HRA slips to the first company. can i claim the HRA for the complete year at the end of the financial year
    ReplyDelete
  11. I am working at bagalore and living in own house.my family is living at delhi in rented house their.Can I claim rent paid for delhi
    house as exemtion from HRA I am getting from my bangalore employer?
    ReplyDelete
  12. For claiming HRA exemption under section 10(13A), it is a necessary condition that residential accommodation in respect of which you’re claiming HRA exemption is occupied by you.

    Therefore, you can’t claim HRA exemption for rent paid for Delhi House (in which your family is residing) while staying in Bangalore.
    ReplyDelete
  13. Hi, I am working in Bangalore. I am planning to lease an apartment for 3 years.Is there any way i can claim HRA?
    ReplyDelete
  14. Yes, of course you can claim it. What's the hitch?
    ReplyDelete
  15. Thank you for the quick reply.When i say lease, i will be giving around 5 lakhs to the landlord. But i will not pay rent on the apartment.After 3 years, i will get my 5 lakhs back. So i will not be having any rent receipts.So in this case how can i claim HRA?
    ReplyDelete
  16. To answer your question, i need a copy of lease deed. You can forward it to my mail id: feedback[at]themoneyquest[dot]com.
    ReplyDelete
  17. I am paying rent of Rs 13500/- in New Delhi , can me and my wife both claim for HRA tax exemption ? If yes , how much for each of us ? We are working in IT companies in Delhi/NCR .
    ReplyDelete
  18. Sandeep: Since you’re paying the rent your wife can’t claim HRA exemption. If both of you want to claim HRA exemption read FAQ no 9 again.
    ReplyDelete
  19. Dear Sir,

    At the outset I congratulate you on the excellent and very informative blog that you have produced.

    I am a central govt employee. I have two queries :-

    (1) I have received HRA dues for the period Jul-Mar 2008 in the FY 2009-10. I have also received HRA for the period Apr-Oct 09 in the same FY year. My query is whether I can claim exemption of HRA for both the periods in the IT Return for the AY 2010-11? ( I believe I should be doing so because I have received the dues in the current FY, but a confirmation from your side would be welcome)

    (2) I would like to know at which para/place in the ITR-1 Form do we need to mention the HRA exempt income and secondly are the details of the calculation of HRA exempt income, to be attached as a separate sheet to the ITR. If so is there a particular format for the same? I have attached a copy of the detailed calculation of HRA exempt income with my mail. May I request you to kindly go over it and let me know if I am doing it right.

    Thanks in anticipation.

    Yours sincerely

    Anurag Tyagi
    ReplyDelete
  20. Anurag,

    1. If you’ve received salary arrears (including HRA), you can claim relief under section 89 read with rule 21A(2).

    2. In ITR-1, neither HRA exempt income to be mentioned anywhere, nor any calculation sheet to be attached (as it is annexure-less form).
    ReplyDelete
  21. Hi Fisher,

    I changed my job on 18th Dec'2009, and with my previous employer I had HRA component in my salary. But when they asked for the proof, I left the company, so they did not consider any HRA amount and deducted the tax on the whole HRA component. So my question is can I claim the refund for the same while filing the ITR-1? if yes then could you please tell is it under section 80GG?

    Thanks & Regards
    ReplyDelete
  22. Yes, you can claim the tax benefit on the HRA in your return of income, even if the claim is not allowed by your employer at the time of TDS on salary.

    You’re entitled to claim HRA exemption u/s 10 (13A) read with rule 2A. Section 80GG is applicable if you’re not receiving HRA.
    ReplyDelete
  23. Dear Sir,
    I am employed in a private organization which does not mention HRA exemption in the pay slip. There is something called FBP which includes HRA, however, not explicitly mentioned in the payslip.
    Unfortunately, I failed to submit rent receipts and therefore failed to claim HRA so far. Therefore, if the Form-16 issues by my employer does not contain HRA exemption, can I still get HRA refund from IT dept, while filing my return? Also, it seems getting HRA deduction under section 80gg have just 2000 limit.
    Thank you very much
    ReplyDelete
  24. hi, i m paying rent Rs. 4500/ per month in delhi. and i m getting consolidated salary per month, HRA is not part of my salary, so plz tell me how can i claim for deduciton and which section...help plz
    ReplyDelete
  25. Anil,

    Claim it under section 80GG.
    ReplyDelete
  26. Dear Sir,
    I am planning to rent out two 2-BHK flats in the same apartment complex. One will be used by me for staying and other one will be used by my dependent parents to stay. Here are my questions:
    1> Can I show the rent of both the flats as total rent paid by me (which will be the case in reality) and claim HRA exemption based on that? Total rent will have two rent receipts--> One from one owner and other one from other owner.

    The idea is not to take a bigger house but rather take two small flats. Because if I take one big house on rent, I am sure I can claim HRA on the full rent which may be equal to the total rent for two flats.

    Thanks.
    ReplyDelete
  27. Sorry, your strategy is not apt from tax point of view. You can claim HRA exemption against rent paid by you for only one flat in which you’re currently residing irrespective of its size.
    ReplyDelete
  28. I am an executive in a PSU and my wife is a teacher. My company pays lease for my accommodation in my own house in the form of 'Self Lease'. As the house is in the joint name ( me and my wife ) , the lease amount paid by my company is credited half to my a/c and half to her a/c.
    My question is, can my wife claim HRA from her employer for the same house ? If yes - how much ? If no - why ?

    Dhanonjay
    ReplyDelete
  29. hai ,
    I Recently changed company in february 2010.My previous company has HRA Component in Salary.

    my Problem is present company considering my Previous Company salary and HRA but not considering HRA exemption for Whole year.

    Is there are any rule Like that.


    I provided Rent Slips for 2009 April to 2010 March.

    please clarify

    Indu
    ReplyDelete
  30. Hi,

    In the last financial (2009-2010) I changed my employer.
    I left my previous organizaion on Jun 29th 2009 and joined the current one on July 27th 2009.

    I coudn't submit rent proofs to my current company in time due to some reason and now they are asking me to submit it while filing IT return. They have already deducted IT of Rs 18500 from my salary because of that. Please note that my last organizaion didn't deduct any IT from my salary.

    Please clarify the following points regarding this:

    1. As relocated to Banglore from Delhi because of job change,do I need to submit rent receipt for both the places.
    2. Can I submit rent receipt alone or do i need to submit rent agreement as well.
    3. Can I use the company provided rent receipt format and use it to file IT return.
    4. What is the possiblity that I'll get back claimed HRA amount.

    Also let me know if there is any other doc that I nedd to submit in order to ensure my HRA claim will be considered favourably.

    HRA as declared in My salary Slip last Organizaion:9495
    HRA as declared in My salary Slip current organization:7500

    Thanks in Advance !!

    -Chandra
    ReplyDelete
  31. Hi,

    I am salaried employee. In my Form 16, the HRA exemption has been calculated at 4673 for the year, while according to the actual rent I pay, it should have been 18625.

    As a salaried employee, I do get a HRA component, but only the above said amaount has been exempted under section 10 (13A)

    Can I add this difference (18625-4673) under Section 80GG ? I have the rental agreement, and rental receipts.

    Thanks
    ReplyDelete
  32. Hi,
    First of thanks a lot for providing such a great input and quick replies to queries asked.
    I have a query regarding claiming HRA exemption. I am getting HRA as a component of my salary but due to some reason i could not submit my rent
    receipt because of which HRA exemption has not been reflected in form 16.
    Now while filling ITR i want to claim HRA exemption. I have done the calculation as per for the amount to be exempted but i am not suer where to mention this amount in ITR1.
    Please help me regarding this
    Thanks & regards
    Inder
    ReplyDelete
  33. Dear Sir,

    At the outset let me congratulate you on the excellent blog.

    I am a central govt employee and have a query :-

    (2) Due to some reasons I could not forward my house rents receipts on time and hence HRA paid to me was taxed. Hence exemption under section 10 (13A) is not reflected in my Form 16. I would like to know at which para/place in the ITR-1 Form do we need to mention the HRA exemption.Para 5 of the form only applies for deductions under chapter VI A and Para 6 is for 'Deductions (Total of 5a to 5l)'. If any other Para please advise how it is to be filled.

    Thanking you in anticipation.

    Regards.
    ReplyDelete
  34. Hi my first company did't provide me HRA exemption in form 16
    how can i claim that while filing IT return.
    ReplyDelete
  35. Dear Sir,

    My company has instructed me that to avail exemption under HRA I have to submit a copy of lease agreement along rent receipt wherein the PAN card of landlord should also be mentioned. They say this is requirement as per Income Tax Law.

    Please provide your opinion.
    Thanks
    ReplyDelete
  36. Hi,

    I worked with 2 employers bet 09-2010. I submitted rent receipt with first employer and got the HRA in form 16. But i didnt submit the rent receipt with second employer and hence its not specified in form16.

    Now i need to file IT return. What is the procedure to submit the rent receipt now and claim the HRA benefit. Which form should I fill for claiming HRA during IT return filing.. please explain me the procedure as I dont find exact details anywhere.

    Thanks.
    ReplyDelete
  37. I have rented a house in a multistoreyed building for Rs. 17000.00 pm which includes an amount of Rs. 2656.00 towards maintenance. This maintenance amount I am paying directly to the society. The balance Rs. 14344 is being paid to the land owner. The receipt given by the society is in the name of the land owner. Can I claim IT benefit on the maintenanve charges?
    ReplyDelete
  38. hello sir
    myself Bharat Santhalia working in proprietorship company where there is nothing called as payslip so there is no HRA & I am staying in rented house, where the rent is 6500+500(Maintenance)=7000,light bill separately so how i can take tax benefit, please help me.

    thanx
    bharatsanthalia@hotmail.com
    ReplyDelete
  39. Bharat,

    You are self-employed and can claim deduction for house rent under section 80GG of Income Tax Act…the deduction will be least of the following three amounts:

    a. Rs. 2,000 p.m.
    b. 25% of your total income
    c. Rent paid minus 10% of your total income
    ReplyDelete
  40. Hi Sir,

    First of all thanks! for such knowledgeable blog.

    Actually My organisation has asked for the proofs in the month of December, Now my question is how will We be able to submit the rent slips for the month of Jan, Feb and March? Would those months rent will not be exempted?

    Thanks & Regards,
    Gurpreet
    ReplyDelete
  41. Gurpreet,

    Kindly read FAQ No. 13 again…you’re entitled for HRA exemption for the entire year, submitting 1-2 months rent receipts for the purpose should suffice. If your tax deduction officer insists on the rent receipts for the entire year, the receipts for the last quarter of a financial year can be submitted in the month of March.
    ReplyDelete
  42. I worked in one company from April 2010 to July 2010 and joined other company in August 2010. Both the companies are at different states.Could you please let me know what are the documents that I need to submit for HRA i.e. do I need to submit the document for the period I stayed in one place in case of the first company . If yes what are the documents that I need to submit from April to July for HRA.
    ReplyDelete
  43. is there any fixed format of rent receipt or it can be a printout of specific details with sign and revenue stamp?
    ReplyDelete
  44. Anonymous,

    There is no fixed format of rent receipt.
    ReplyDelete
  45. I have relocated to hyderabad from noida, I have not submitted any rent receipt with my current as well as previous employer. I have HRA component with both employers.
    Can I claim refund at the time of filing return?
    If yes, would I need rent receipts of both noida and hyderabad?
    Do mention brother if anything else would be required to get the excemption(refund)?
    Thanks in advance.
    Ankur
    ReplyDelete
  46. Ankur,

    Yes, you can claim refund and you should be having rent receipts of both Noida and Hyderabad; but, you don’t have to attach those with your tax return. Remember, it is quite possible that you might not get the refund.
    ReplyDelete
  47. Dear Sir,

    Can I also include the monthly Maintenance and electricity charges, over and above my house rent to claim HRA exemption?

    Thanks in advance.
    Mudassar
    ReplyDelete
  48. My Employer didn't allow me to claim the HRA benefit for previous FY (2009-10). Can I file a revised return and apply for the refund for the HRA amount now?

    Thanks,
    Chandraprakash
    cpjain77@gmail.com
    ReplyDelete
  49. can both husband and wife claim HRA exemption?

    They both are working in the same company. Can they show their share of 50% rent and mention it in the rent agreement.

    regards
    Shailender Bali
    sbali1976@yahoo.co.in
    ReplyDelete
  50. Dear Sir

    I am an employee in private organisation. I had taken leave for 15 days and did not have enough leaves therefore some of them were loss of pay.
    Now my query is while calculating the HRA exemption should i also proportionate rent for that month or not.

    Regards
    Jyoti
    ReplyDelete
  51. Hi,

    I have worked in two organisations Apr to Nov in Kolkata & Nov to Mar in Gurgaon. Due to this switch over I have been unable to submit rent receipts & now my whole income has become taxable. The form-16 is also not reflecting any HRA component. Can I still claim HRA?

    Regards

    Sanjay Guha
    ReplyDelete
  52. Hi,
    I had provided a tentative HRA amount to my employer based on which they deducted tax. When I am about to file my retruns and was reconciling my record, I realized that I have paid lesser rent than the benefit provided for TDS by my employer. I want to pay the appropriate taxes to the Govt. Can I pay this additional tax while filing a return. If yes, under which section of the ITR2 do I declare this amount.
    ReplyDelete
  53. I am paying Rs 14000 as HRA and Rs 3000 as maintenance charges to my landlord. As per latest IT act if the landlord is getting annual income for more than Rs 180000 he needs to show the PAN number so is it applicable in my case also. As i am paying Rs 14000/- as HRA and Rs 3000 seperately as maintenance.
    ReplyDelete
  54. I have declared 8000 for hra exemption during the provisional declaration for exemption from taxes for financial year april 2011-march 2012.Then I have paid rent of Rs.8000 monthly to the house owner from April 2011 till date and I have the receipt from April 2011 till January 2012 as of now.Now my problem is, I have declared in the provisional declaration for month of february and march also but I dont have the rent recipt of those months as I pay only monthly to house owner.Now my company is asking me to submit the originals before jan 31,2011.Will they deduct tax stating I havn't submitted the rent bills from february and march 2012?Please help me..
    ReplyDelete
  55. My employer asking bank statement for the House rent paid. If bank statement is available then only HRA excemption will be considered otherwise not. Please let me know according to tax law bank statement is mandatory?
    ReplyDelete
  56. Hi,
    I am working in PSU and residing in company quarter and not reciveing HRA. Can i avail tax exemption on HRA taken by company?

    Regards
    ReplyDelete
  57. Sir,pl guide me
    Annual salary-4,50,000
    Annual HRA-27000
    Actual HRA paid-38500
    City-Davanagere-karnataka
    How much HRA exemption I can Claim?
    ReplyDelete
  58. Sir i wanna know dat i along with my wife are living in a rented accommodation. I also have one house at Dehradun for which i also claim rebate u/s 24 of I.T. Act. Pls tell me, are we both entitled for claiming HRA
    ReplyDelete

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