Meaning: House Rent allowance is an allowance that depends on the "Basic" component of salary and it is also depends on "Areas" as Metropolitan and non-metropolitan If Metropolitan area then it's 50% of Basic and if non-metropolitan area, then it 40% of Basic.
Who can Claim:
1. HRA for Self-Employed Individuals- Individuals who are self-employed can also avail of deductions and tax exemptions towards House Rent Allowance (HRA). They can claim these benefits by utilizing Section 80 GG.
2. HRA for Salaried Individuals- Section 10 (13A), rule number 2A of the Income Tax Act allows salaried individuals to claim exemptions for House Rent Allowance (HRA).
Calculation: There are three scenarios of calculation of HRA
HRA for Salaried Individuals:
A. HRA received from an employer.
B. HRA paid to Landlord.
C. HRA paid -10% of basic.
for Example- a. HRA received 7500.
b. HRA paid 8100
c. 8100-10% of 15000 that is 8100-1500=6600
above lowest amt will be Exemption and rest is taxable.
Tax Computation:
Taxable-HRA- 7500*12=90,000
Exemption: 6600*12= 79,200 so that 90,000-79200=10800.
HRA for Self-Employed Individuals:
Calculation:
a. 5000/- pm
b. 25% of adjusted Total Income
c. Actual rent should be less than 10% of adjusted total income.
Above lowest amt will be Exemption and rest is taxable.
Important point:
1. Proof should be of financial year.
2. Proper Signature of Landlord
3. Original Stamp on Rent receipts
4. if employee claim HRA above 83,333 Amt then must need Pan card of employee.