Specific Conditions for Salary Individuals to Claim HRA U/S 10 (13A)

People working in a company who have chosen the old tax regime, reside in rented houses, Under section 10(13A) of the Income-Tax (I-T) Act, 1961, and possess the house rent allowance (HRA) elements included in their salary shall be qualified for the exemption of the HRA tax given that they would shall able to fulfil some conditions. Under the new tax regime, the same exemption shall not be available from the assessment year 2021-22.

Some grey areas are being specified in which the same would not be quickly specified when the assessee would be qualified for the same exemption.

Renting While Owning a Home in Different Cities

An individual shall obtain tax exemption on HRA if they pay rent for the accommodation. The caution would be that the house you reside in and the home you had owned must be in distinct cities.

People own a property in an identical city but reside in rented accommodation. In this case, you must have a compelling justification for not residing in your own home. One possibility is that your home is far from your business. In the event of a review, you could be required to give the I-T authorities these justifications.

If you want an HRA exemption, your home must be rented out. If your home is unoccupied or self-occupied, you are not eligible for this exemption.

Tax Deduction on HRA and Home Loan

Several taxpayers enquire as to whether they may concurrently claim an HRA exemption and a tax deduction for house loan interest.

As HRA has no effect on your home loan interest deduction, you may claim it. Both are admissible

Not Received Any HRA While Paying Rent

Many individuals pay rent to live in residential housing, but HRA is not a part of their compensation. If certain requirements are met, you may be able to claim a deduction under Section 80GG in this circumstance.

First, you have to be an employee or self-employed. Two, you must not get HRA at any point in the year that you are claiming a Section 80GG deduction.

The third requirement is that you, your spouse, your minor child, or the Hindu Undivided Family (HUF) to which you belong should not be the owner of residential property in the location where you now dwell, work, or engage in your profession or company.

Also, if you own a vacant or self-occupied residential property in any other city, you are not eligible to claim this deduction. Only if the property is rented out may you make this deduction. For you to be able to claim this deduction, it will be assumed that it is rented out even though it is sitting empty.

Must Submit the PAN Card of the Landlord

You must supply the landlord’s permanent account number (PAN) if you rent a home and pay more than 1 lakh in a year. You risk losing the HRA exemption if you don’t do this. Without a PAN, landlords must certify in writing that they lack this document.

Pay Rent to Parents

Renting to your parents while claiming HRA benefits is permitted. They need you to sign a lease with them and make regular payments of rent to their account through check or bank transfer. Have a copy of your lease and your rent receipts available in case you need to provide evidence.

The rent that your parents received will be taxed. On this income, they are eligible for a standard deduction of 30%. Also, your parents must own the property. It cannot be owned jointly by you, your spouse, or your minor kid.

The Income Tax Appellate Tribunal in Delhi last year held that the HRA exemption cannot be disallowed on the basis that an assessee paid his spouse’s rent.

Read Also: How to Claim Tax Exemption on HRA When You Work from Home?

As the connection between the renter and the renter’s spouse is one of a non-commercial character, paying rent to family members, especially spouses, has long been a controversial one. The tax authorities may investigate a transaction like this.

Exemption from HRA on Rent Paid to Parents

• Before calculating gross taxable income, HRA exemption is subtracted from total income.
• Your employer’s HRA will be entirely taxed if you don’t pay rent or live in your own home.
• Rent paid by a taxpayer to a family member may be excluded from HRA for the least of the following amounts:
• Real HRA received: 50% of income in Mumbai, Kolkata, Delhi, or Chennai’s major cities, or 40% of salary in all other cases.
• Rent exceeded by 10% of pay