Income Tax Season: Not just 80C, this Income Tax section can give you instant tax exemption- know how to take its advantage while filing ITR
Tax exemption benefits: Section 80C of the Income Tax Act is quite a popular section among salaried persons when it comes to saving tax in a financial year. The section provides tax exemption of up to Rs 1.50 lakh in a financial year. But not just Section 80C, House Rent Allowance (HRA) also comes under the purview of tax exemption. This part is deducted from your total income before calculating gross taxable income.
HRA tax benefits: Whenever there is a talk of saving tax, the first impression that most of us have is to save tax through Section 80C of the Income Tax Act, 1961. The section offers tax exemption of up to Rs 1.50 lakh in a financial year. Contributions to EPF and NPS, life insurance premiums, tuition fees of your children are some of the aspects that come under Section 80C. However, it is not the only eay to save tax. There are many other sections under the Income Tax Act that can help you save your tax a great deal. One of them is Section 10 (13A), under which you can avail tax exemption on House Rent Allowance (HRA). Here's how:
A salaried person gets House Rent Allowance (HRA) as an important part of their salary.
HRA can also help you save tax to a great extent.
However, it is necessary to pay rent for this. But, can you avail the benefit of HRA without living in a rented house.
If yes, how can it be claimed?
How to avail HRA benefit
Though HRA can play an important role in saving your tax, there is a limit to it and there are some important conditions as well.
Tax benefit is available on HRA under Section 10 (13A) of the Income Tax Act.
HRA is deducted from your total income before calculating Gross Taxable Income.
HRA tax benefits
Self-employed people do not get the benefit of this.
Even if you live in your own house, you cannot avail this benefit.
To get the HRA benefit, it is necessary that you live in a rented house.
Suppose you work in Delhi-NCR and have to commute to office from your home, will you get the benefit of HRA?
Take HRA tax exemption without paying rent
If you do not live in a rented house but live with your parents or any relative and have to commute to office from there, you can get the benefit of HRA in that condition.
According to tax experts, if the house is in the name of any of your relatives like parents, you can take tax exemption on it.
For tax exemption, parents will have to pay rent.
For this, a rent agreement and a rent receipt will be required.
However, the total amount of rent will have to be shown as the income of the parents. If they come under the tax bracket, the rent amount will be added to their total income and they will have to pay tax on it.
If they do not have any income, then this will also be a source of income for them.
In this way, double benefit can be availed.
The condition is that the house should not be in the name of the taxpayer.
How HRA calculation will be done
There are 3 conditions regarding HRA.
1. This will be 40/50 per cent of your basic salary. For metro cities (Delhi, Mumbai, Kolkata and Chennai), the limit is 50 per cent and for non-metro cities it is 40 per cent.
2. How much HRA is the company giving you.
3. How much rent have you actually deposited - minus 10 per cent of the basic salary.
In the calculation, Dearness Allowance (DA) is also included along with the basic salary, if you are getting the benefit of DA.
The benefit of tax exemption will be available on the minimum amount in the above three conditions.
The last date of filing ITR is July 31. The HRA trick may help you save tax.
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