Income Tax Advantage Upon HRA for WFH
Towards salaried individuals, the tax exemption upon the house rent allowance (HRA) is an essential advantage. HRA has arrived through the portion of the salary and can be claimed through the employees residing on rent.
There are multiple salaried persons, specifically young ones who live far from the place taken on rent and work from home along with their parents. But now the same employees are confused that if they can avail of house rent allowance (HRA) even when they are residing with their parents while working from home and if they are permitted to do so then how is it possible? The article, it elaborates on the issues in brief. But first, let us know who is liable for HRA and what is the method of computation.
Who Obtains HRA & What is the Method to Compute it?
HRA is available towards salaried persons and provides a portion of the salary. The employees who are residing on rent shall be provided with the ease of full or half privilege from the tax on the obtained amount on HRA. But the employees who are living on rent shall not get relief from tax and the employees are subjected to pay the full tax on HRA. one of the circumstances must be required to claim for the HRA advantage.
One can avail of the HRA tax benefit when the employee files the rent. This reveals that the HRA tax advantage cannot be availed if the rent is not filed.
Computing the House Rent Allowance (HRA)
Tax privilege instead of HRA is available on the least of the mentioned amounts:
- Real HRA Obtained Through the Employee
- 50% of salary (Basic + DA) for employees living in metro cities. And 40% of basic + DA for employees living in non-metro cities.
- Real rent furnished minus 10% of salary (Basic+DA)
When it is the question of the salaried employees who are residing with their parents while working from home, the tax advantage on HRA shall not be present if they did not furnish any rent. But this facility shall be claimed through people who had filed the rent to their parents.
No HRA Advantage When no Rent is Filed
“An employee, in receipt of House Rent Allowance (HRA), is ineligible to claim tax exemption for such HRA if he/she owns the residential accommodation occupied by him/her or has not actually incurred any rental expenditure i.e. HRA received can be claimed as an exemption only if the rental expense has actually been incurred by the employee on the residential accommodation occupied by him/her, said the tax expert.”
If one has filed the rent to their guardians then it must be displayed as a rental income in their income tax return. Their rental agreement must be implemented and furnished as payment proof.
“In practice, there would be fewer instances of a son or daughter getting into such rental arrangements with their parents. Further, the income tax department would be vigilant on these kinds of inter-family transactions, which might result in scrutiny and assessments.”
