Rules for claiming HRA Deduction

House Rent Allowance (HRA) is a component of salary provided by employers to employees to meet their rental housing expenses. Claiming HRA deduction is subject to certain rules and conditions under the Income Tax Act in India. Here are the key rules for claiming HRA deduction:

  1. Receipt of HRA: You must be in receipt of HRA from your employer. Self-employed individuals cannot claim HRA deduction.
  2. Rent Payment: You should be paying rent for the accommodation you live in. The rented property can be either furnished or unfurnished.
  3. Residential Status: You should be a salaried individual and a resident of India to claim HRA deduction.
  4. Rent Agreement: A proper rent agreement or lease agreement should be in place. It’s advisable to have a written agreement with the landlord specifying the terms and conditions of the rent.
  5. Rent Receipts: You need to submit rent receipts to your employer as proof of rent payment. Rent receipts should include details such as the amount of rent paid, the duration for which it is paid, the name and address of the landlord, and a revenue stamp (if the annual rent exceeds Rs. 1 lakh).
  6. Actual Rent Paid: You can claim the least of the following three amounts:
    • Actual HRA received.
    • 50% of your basic salary if you live in a metro city (or 40% if you live in a non-metro city).
    • Actual rent paid minus 10% of your basic salary.
  7. Location of Residence: The HRA exemption is higher if you live in a metro city (as defined by your employer) compared to non-metro cities.
  8. Own House: If you are living in a house owned by you, you cannot claim HRA deduction.
  9. PAN of Landlord: If the annual rent paid exceeds Rs. 1 lakh, you need to provide the PAN (Permanent Account Number) of your landlord.
  10. Form 12BA: Your employer will provide the details of HRA and other allowances in Form 12BA along with your Form 16.

It’s important to note that these rules may change, and it’s advisable to check the latest tax regulations or consult with a Income tax Return professional for the most accurate and up-to-date information.

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