What exactly is HRA?
HRA stands for house rent allowance. This is an amount given by the employers to their employees as an allowance in addition to the basic salary. Usually, HRA helps the employees in getting a suitable residential accommodation at their place of residence. Going by the provisions of Section 10(13A) of the Income-tax Act, the amount gets fixed by the employer depending on the salary of the employee and place of residence. The important point is house rent allowance (HRA) is only available for the salaried employees.
As a rule, if an employee is living in a rented accommodation and the rent in a particular year is more than 1 lakh rupees, then the employee would need to furnish the PAN details of the house owner.
Some Facts about HRA
House rent allowance (HRA) gets calculated on the basis of two rules
- If the employee is staying in a metro city, he would get 50% of its basic salary as HRA. If he is staying in a non-metro city, he or she would get 40% of his basic as house rent allowance.
- The lowest sum from the three categories is considered as house rent allowance (HRA). Either the sum obtained from the employer as HRA. Secondly, it is the actual rent paid 10% of the basic salary. The last option is, it also could become 50% of the basic salary for the metro cities or 40% of the basic salary for the non-metro cities. HRA gets calculated either one of the three options.
What is the advantage of HRA?
As the HRA gives tax benefits, it gives the biggest benefit of having the reduction in taxable income. An employee working in India can take the advantage of HRA to get tax exemption.
So, now its clear how HRA calculator works, you can use above given tool to find the tax exemption limit for the Financial Year 2016-2017.
Please check this http://persmin.gov.in/ to know more about HRA rules in details.
What documents need to submit for HRA Claim?
If you are going to claim for HRA then make sure that you must have a rent receipt which must be duly signed by the owner along with Rs 1 revenue stamp. Please note that the owner needs to sign over revenue stamp. The rent receipt should include the house address and the date. No need to submit all 12 months of rent receipt, April month of last year and March month of current year receipt will work. In case if you don’t have the receipt then you can download the house rent receipt here.