The financial year is all set to end and you are likely to begin your tax planning for the next financial year. Many individuals like to know about House Rent Allowance and Tax benefits an individual gets under the same.
1) HRA Tax benefits can be claimed as follows. The least of the below three shall apply.
a) Actual HRA that one gets
b) 50 per cent of salary if an individual is residing in a metro, or else it is 40 per cent. Metro would include Mumbai, Delhi, Chennai and Kolkata.
c) Excess of rent paid over 10 per cent of an individual's salary.
2) Tax benefits under the section can be claimed only when an individual is receiving house rent allowance as a part of his salary. You cannot claim otherwise.
3) You need to submit proofs of the rent paid. Ideally, what the employer asks you would be the rent receipt and the lease deed. Some may insist on seeing the original deed. How the scrutiny would take place would largely depend on your employer.
4) PAN Card of the landlord has to be mentioned. This can be in the receipt or wherever. The employer is bound to reject the receipt if there is no mention of the PAN card of the landlord.
5) If an individual is staying with his parents as most bachelors and spinsters do, they can claim tax benefits under the section. However, the norms like mention of PAN card and the rent receipt would need to be furnished.
6) The tax break for the section is received under Sec 10 (13A) of the Income Tax Act.
7) The employee should also be paying the rent. Or else an individual would be staying in his parents house without paying the rent and claiming tax benefit. The intention and conscience must be clear.
8) HRA and Home Loan tax benefits can both be claimed. Home loan tax benefits include those for the interest paid on the home loan and also on the principal amount paid on the home loan.
9) You can claim tax benefits only for the period you have paid the rent. In case you shift to a new place in the financial year, you cannot claim for the entire year.
It's important to study the guidelines before claiming the tax benefits. You have to make sure that you comply with the set guidelines.