Rules that are applicable for HRA claims:
- HRA amount cannot be more than half of your basic salary.
- HRA benefits can be claimed for interest paid for home loans.
- You can pay rent to your parents and claim HRA benefits, but not your spouse.
- If the yearly rent exceeds Rs. 1,00,000, the PAN number of the landlord is required to submit HRA claim form.
- If your landlord is a Non-Resident Indian (NRI), 30% tax can be deducted from the rent and declared.
- You can request your employer to rearrange the salary structure to avail maximum tax benefits.
- If the deciding factors are constant, the HRA calculation can be done yearly and if any factor changes during the respective fiscal year, it can be calculated every month.
Tax Benefit Scenarios - Home Loan and Rented Residence
Case 1Employee owns a home and pays home loan for the same. The employee is staying in another rented residence. The owned home is rented to someone else.Tax benefits can be claimed on both home loan and paid rent.
Case 2Rented and owned property are in the same city
Tax benefits can not be claimed
Case 3Employee is earning income via the owned home (rent or lease).
He or she has to pay the due tax for the income. If the employee is paying the home loan, deductions can be claimed.
Case 4 Employer refuse to provide tax benefits for HRA
The employee can claim tax benefits while filing ITR. The exempted amount can be availed as tax refund too.
Case 5 Both taxpayer and spouse are paying the house rent.
Unless they provide separate rent receipts, for a single rent period, only one of them can claim tax exemption.