Govt Changes Rule on HRA Claim
Many people live in their own houses, yet claim HRA tax benefit by submitting a rent receipt. The government has now plugged this loophole. It has also lowered the exemption limit for reporting the rent received. The Central Board of Direct Taxes recently issued a circular in this regard.
If you’re a salaried taxpayer claiming HRAexemption, and you pay a rent of more than Rs. 1 lakh a year, you will now have to give your landlord’s PAN. If your landlord does not have a PAN, you have to give the tax authorities the name and address of your landlord and a declaration fromthe landlord saying he or she does not have a PAN.
Till now, if the total rent paid was less than Rs 15,000 a month, there was no need to submit the landlord’s PAN details. The new rule effectively reduces this limit to Rs 8,333 a month.
Henceforth, be careful about the HRA receipt. Here’s a sample calculation to determine the HRA claim:
a) HRA amount received
b) Rent paid in excess of 10 per cent of salary
c) Fifty per cent of salary if you live in Mumbai/Delhi/Kolkata/Chennai or 40 per cent of salary if you reside in other cities. Salary is the sum of Basic Pay and Dearness Allowance.
Sample calculation:
Assume you live in any one of four metros:
Basic salary: 20,000
DA : 10,000
HRA received: 10,000.
Rent paid: 15,000
How much is eligible for tax benefits as per the act? Whichever is the lowest.
HRA : 10,000.
Rent paid in excess of 10 per cent of salary: 15,000 – (10% of 30,000),
or 15,000-3,000= 12,000.
50 Per cent of salary(30,000) is 15,000.
The least of the three figures (10,000/12,000/15,000) is HRA received (10,000). Hence, hence the entire HRA is exempted from tax.
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