Understanding HRA exemption: A guide to claiming it while filing ITR in India

HRA Exemption: An overview

The HRA exemption calculation relies on factors such as salary, HRA component, rent paid, and location. To claim HRA as an exempt allowance, it needs to be included in the salary details while filing ITR 1, with rent receipts as proof.

You can claim HRA even if you are availing home loan benefits, meaning you can benefit from both HRA and interest on home loans, provided certain requirements are met. Accurate information and correct documentation are essential to prevent any complications arising from false HRA claims.

How much HRA exemption can one claim?

The amount of HRA exemption that one can claim is subject to certain limits and conditions. In fact, the Income Tax Act of India does not specify any maximum limit for claiming HRA. However, the exempt amount will be the lowest of the following three conditions:
\Actual HRA received from the employer

50 percent of (basic salary + dearness allowance) for those living in metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40 percent for those living in non-metro cities

Rent paid minus 10 percent of (basic salary + dearness allowance)

Living with parents and paying rent

HRA exemption is applicable even if you are paying rent to your parents, given you are occupying the property owned by them. Like any other rental arrangement, having a rent agreement between you and your parent(s) is crucial. Along with that, rent receipts must be provided to the employer to claim HRA exemption.

Your parents must also declare the rent received from you as rental income when filing their income tax returns.

How to claim HRA while filing ITR

HRA should be declared in your income tax return. If you are a salaried individual and receive Form 16 from your employer, the exempt portion of the HRA is mentioned under Section 10 in the form. It’s important to note that while filing your ITR, the total HRA received, the exempt portion and the taxable portion need to be reported separately.

In case you have yet to receive Form 16, the TDS details can be filled out using Form 26AS. This form is used to compare TDS deducted from income with TDS deposited by the deductor. Form 26AS also provides an option to verify Form 16A in case it is absent. If you make an error or omission or need to make changes to your original return, you can file a revised income tax return under Section 139(5) of the Income Tax Act.