Pan Card for HRA Exemption - Calculation, Eligibility, and More

House Rent Allowance is a component of the salary provided to the employee by the employers to address the need for rented accommodation. The employee can claim this HRA component to be exempted from tax under section 10 (13A) of the Income Tax Act . The HRA component can be tax-exempted only if the individual is living in a rented house and is fully-taxable otherwise.

An individual is eligible to claim for HRA exemption only if-

• The salary structure mentions the HRA component, and
• The individual is living in a rented house.

As per the Income-tax Rules, the least of the following amounts can be exempted from tax and will not be considered a part of the taxable income:

• The HRA received from the employer.
• Actual rent minus 10% of the (Basic salary+DA).
• 50% of (Basic salary+DA) for metro city residents and 40% of (Basic salary+DA) for non-metro city residents.

For Example, let's say that an Employee named Amit earns a salary of Rs. 55,000 (Basic) per month with an HRA component of Rs. 20,000. Amit stays in Bangalore (Metro) in rented accommodation and pays Rs. 15,000 rent per month. Now let’s look at the below three values applicable in this case:

1. Total HRA received from employer = Rs. 20,000*12 = Rs. 2,40,000
2. House rent minus 10% of the basic salary = (Rs. 15,000*12) – (10% of (55,000*12))=Rs. 1,14,000
3. 50% of the basic salary = 50% of (12*Rs. 55,000)= Rs. 3,30,000

Hence, the HRA amount for tax exemption will be Rs. 1,14,000, in this case, since it is the lowest of the above amounts.Do note this is for employees working in private companies. For government employees, HRA exemption will be calculated as per the rules set in the 7th Pay Commission.

For availing of the exemption benefits, an individual needs to submit a copy of the rent agreement and duly signed rent receipts. Apart from these, details of PAN card for HRA exemption is required if the annual rent paid is more than Rs. 1,00,000.It is mandatory to submit the PAN card copy of the landlord along with the exemption for in such cases. In case the landlord does not own a PAN, you can submit a declaration of no PAN enlisting the following details;

1. Name and Address of the Landlord
2. Rent Amount
3. Property Address
4. ID number
5. The Signature of the Landlord