House Rent Allowance (HRA) is deducted by employers from salaries and can be seen in part B of Form 16 while you are filing an Income Tax Return (ITR). As per Section 10 (13 A), HRA exemption can only be claimed if one lives in a rented house. Those who are not receiving HRA like non-salaried individuals can claim a deduction for their rental expenses under Section 80GG. Taxpayers who reside in their own house are not eligible for the HRA exemption benefit.
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Claiming HRA correctly is a legal requirement as well as a valuable tax-saving tool for salaried taxpayers. Here’s how to claim HRA during tax filing in order to maximize your tax savings:
Exemption on HRA is calculated based on the least of the following:
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- Actual HRA received
- 50% of salary (for those living in metro cities) or 40% of salary (for non-metro residents)
- Rent paid minus 10% of the salary.
What documents are required to claim HRA?
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- Rent Receipts with acknowledgments from the landlord with the landlord's PAN details in case rent exceeds ₹1 lakh annually
- Rental agreement
Penalties for false HRA claims
False HRA claims can lead to penalties. In case you underreported your income, a penalty of 50% of the tax is levied. A penalty of up to 3 times the amount of tax sought to be evaded can also be levied.
{{/usCountry}}False HRA claims can lead to penalties. In case you underreported your income, a penalty of 50% of the tax is levied. A penalty of up to 3 times the amount of tax sought to be evaded can also be levied.
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