You will have to submit the rent slip to your employer as a proof of rent payment for claiming the exemption of house rent in Income Tax. Some companies can also demand for rent agreement. Employer calculates the exemption of HRA and deduct the TDS on the basis rent slip. If rental amount is less than one lakh then it is not mandatory to give the landlord's PAN number along with rent slip but whenever this limit crosses one lakh, it is mandatory to give landlord's PAN number to the employer for claiming HRA exemption. For claiming the HRA exemption, employees were used to present fake rent slip but after the new ruling on PAN number, it is not only difficult but also become impossible.
HRA is an important part of salary income. The HRA amount is always been a certain percentage of basic salary, which employee gets for the rental house. Thus, as per the income tax provisions, tax exemption is available for HRA. Notably, employees resides in their own house doesn't get HRA as they don't pay the rent. Today, we are discussing the Income Tax exemption on HRA that employee can claim HRA in which circumstances and what is the procedure of claiming it.
By now, one thing must have been cleared to you that only those employees can claim HRA exemption who resides in rental house and pays rent for it.
The HRA exemption will be lower of the following:-
1. 50% of Basic Salary if employee resides in Delhi, Mumbai, Kolkata and Chennai. While, it is just 40% of Basic Salary if employee leaves in any other city of India.
2. Rent paid - 10% of Basic Salary
3. Actual HRA received
Now, we are trying to explain the HRA exemption as per the example.
Mr. X has monthly salary slip like this-
Basic Salary - 25,000, HRA - 14,000. He leave in Indore and pays monthly rent of Rs.11,000. His HRA computation on technical grounds will be like this:
1. 40% of Basic Salary = 1,20,000(40% of 3,00,000)
2. Rent paid - 10% of Basic Salary = 1,02,000(1,32,000-30,000)
3. Actual HRA received = 1,68,000
Rs. 1,02,000 is lower of the above three. Thus, Mr. X will get HRA exemption on Rs. 1,02,000 only. But he gives the12,000 rupee rent slip to his employer every month. Due to this, his exemption limit on HRA has increased to Rs. 1,14,000(as per step 2 computation). Thus, 66,000 rupees would have been added to his total income but now only 54,000 rupees will be added due to the fake slip presented by him. However, new rules related to PAN number have ensured that such manipulations are no longer possible for claiming more HRA exemption.
HRA is an important part of salary income. The HRA amount is always been a certain percentage of basic salary, which employee gets for the rental house. Thus, as per the income tax provisions, tax exemption is available for HRA. Notably, employees resides in their own house doesn't get HRA as they don't pay the rent. Today, we are discussing the Income Tax exemption on HRA that employee can claim HRA in which circumstances and what is the procedure of claiming it.
By now, one thing must have been cleared to you that only those employees can claim HRA exemption who resides in rental house and pays rent for it.
The HRA exemption will be lower of the following:-
1. 50% of Basic Salary if employee resides in Delhi, Mumbai, Kolkata and Chennai. While, it is just 40% of Basic Salary if employee leaves in any other city of India.
2. Rent paid - 10% of Basic Salary
3. Actual HRA received
Now, we are trying to explain the HRA exemption as per the example.
Mr. X has monthly salary slip like this-
Basic Salary - 25,000, HRA - 14,000. He leave in Indore and pays monthly rent of Rs.11,000. His HRA computation on technical grounds will be like this:
1. 40% of Basic Salary = 1,20,000(40% of 3,00,000)
2. Rent paid - 10% of Basic Salary = 1,02,000(1,32,000-30,000)
3. Actual HRA received = 1,68,000
Rs. 1,02,000 is lower of the above three. Thus, Mr. X will get HRA exemption on Rs. 1,02,000 only. But he gives the12,000 rupee rent slip to his employer every month. Due to this, his exemption limit on HRA has increased to Rs. 1,14,000(as per step 2 computation). Thus, 66,000 rupees would have been added to his total income but now only 54,000 rupees will be added due to the fake slip presented by him. However, new rules related to PAN number have ensured that such manipulations are no longer possible for claiming more HRA exemption.
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