The House Rent Allowance is additional payment made by the employee in order to cater to the house rent needs. Along with its basic utility, HRA also provides income tax benefits under Act 2A, Income Tax Act including bank employees. Salaried personnel are eligible for HRA. Businessmen need to apply separately for the same.
Depending on Urban or Rural setting, HRA tax rebates are calculated and granted. Generally HRA granted for Urban setting is 50% of basic and for Rural is 40% of basic. Tax rebate is only applicable if the employee resides in a house other than his own or his/her spouse. In this case any rent paid above 8000 INR, the landlord needs to provide the PAN number. In case of given rent to one’s own parents, an income tax file needs to be maintained by the parents or relatives in order to show income through rent, which is wholly taxable. An employee cannot pay rent to his/her spouse as according to the Marriage Act, husband and wife needs to stay together. In both the scenarios, rent bills need to be provided, once during the beginning and once at the end of the fiscal year.
Also check HRA rules for Bank employees here in detail.
There are different regulations for HRA in case of both the husband and wife is working. Let us explore the different criteria for availing HRA for working couples:
- Scenario 1: If husband is working in State Government and wife works in Central Government, then a maximum of 6000 INR is allotted for both. Thus if the wife gets INR 6000 as HRA in her salary, then the husband will not be entitled to any HRA.
- Scenario 2: If both the husband and wife are working with the Central Government and are not availing the government quarters for living, both would be eligible for HRA stipulated by the governing body and the finance department. Even if one decides to enjoy government quarter facility, HRA will not be granted to the couple.
- Scenario 3: According to State Government, similar rules are followed. The Calcutta High Court recently announced that HRA for a government working couple will be granted if any one of them is stationed at a distance of 250 kms away from the spouse. In this case both husband and wife enjoys the benefits of HRA. Different states of India have a different set of HRA rules. So it is best advisable to check with the state legislations.
- Scenario 4: For PSU or Public Sector Undertaking, if a couple resides in one house, then only one of them is entitled to get HRA.
- Scenario 5: For private organizations, HRA rules as laid by the company needs to be followed and is more or less at par with the government. The couple is eligible for HRA if they are in separate organizations and are living separate. Also if living together, only one is granted HRA and only one can enjoy tax rebate.
- Scenario 6: HRA is granted if husband and wife works separately in a government and a non-government undertaking provided they are not entitled to the privilege of staying in the government quarter. In this case none get the HRA.
Thus keeping all the above factors in mind, a working couple can save on tax as a family and enjoy the HRA benefits.