House Rent Allowance (HRA) is one such not fully taxable component of your salary. One of the biggest advantages of HRA is that it is deducted from the salary before arriving at your final taxable income.
House rent allowance is a common component of salary for most employees, and they can use it to reduce their taxable income by claiming an exemption under Section 10 (13A) of the Income Tax Act. It is important to note that HRA benefits are not applicable if the individual or their spouse, or minor child, or as a member of Hindu Undivided Family (HUF) own any accommodation. You also cannot claim deductions if you earn rent from any residential property anywhere in the country.
Benefits of HRAOne of the most significant advantages of HRA is the reduction in taxable income for salaried employees. Your employer can add HRA component in your salary to ensure that you have the opportunity to bring down your total taxable income. HRA is a legit way to reduce the taxes that you pay and avail benefits offered by the government.
House rent allowance can be claimed even if you stay with your parents. In such an event, you will have to enter into a rent agreement with your parents and pay monthly rent to your parents. Make sure that you pay the rent monthly so that you can produce sufficient proof if there is any query by the income tax department.
Key PointsIt is important to note that even if you are not a salaried person, but you pay rent towards accommodation, you can claim HRA under section 80GG of the Income Tax Act. Salaried professionals who do not have an HRA component in their salary can also claim deduction under this section.
It is worth noting that the exemption limit of your HRA benefits is the minimum of rent paid annually less 10 percent of annual salary, actual HRA received, and 50 percent of basic salary if you live in a metro or 40 percent if you reside in a non-metro city.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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