New Delhi: House Rent Allowance (HRA) exemption is a valuable benefit afforded to salaried individuals, designed to assist them in offsetting the costs associated with renting a place of residence, thereby enabling them to subtract a portion of their income from their taxable income, which in turn reduces their overall tax liability and alleviates some of the financial burden associated with paying income tax.HRA exemption: Lowest of threeThe amount of House Rent Allowance (HRA) that can be exempt from tax is the lowest of three possible values: firstly, the actual amount of HRA received as stated in your salary slip secondly, the actual rent paid minus 10 per cent of your basic salary, which takes into account your real rent expenditure and a basic deduction and thirdly, the HRA limit-specific to your city type, which is 50 per cent of your basic salary plus dearness allowance (DA) if you reside in a metro city (such as Delhi, Mumbai, Kolkata, or Chennai) or 40 per cent of your basic salary plus DA if you reside in a non-metro city.Documents required to claim HRA deductionTo claim the House Rent Allowance (HRA) deduction on your Income Tax Return (ITR), you may require the following documents, depending on your situation:- Rent Agreement: A valid rent agreement for the current financial year, serving as proof of rented accommodation.- Rent Receipts: Duly stamped rent receipts for monthly payments made during the financial year, even if you pay rent electronically.- Landlords PAN Card: A copy of your landlords PAN card, if your total rent paid in a year exceeds Rs 1 lakh, to submit to your employer for HRA exemption.- Proof of Payment: Bank statements, online transaction receipts or other evidence showing actual rent payment.- Rent to Family Members: Proper documentation is crucial, even when paying rent to family members, as income tax laws do not prohibit such payments.If the family member must file an ITR, its essential to ask them to report the rent received as income in their tax return. Additionally, as a salaried employee, your employer may require you to complete an Employee Declaration Form to claim the HRA exemption. This form typically requests details about the rented accommodation, including the rent amount paid to process your HRA exemption claim.
