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HRA Tax Exemption-How to Calculate Your HRA Tax Exemption in 2022

HRA Tax Exemption-How to Calculate Your HRA Tax Exemption in 2022

It has been predicted that the HRA tax exemption in India will change in 2022. This change will affect people from a variety of different career fields, but it will especially affect the self-employed. This means that it is important to know how to calculate your HRA tax exemption in 2022. This article will provide information on how to calculate your HRA tax exemption in 2022.

It is a popular phrase called HRA. It is a reference to House Rent Allowance. For rented residences occupied by an employee, they receive house Rent Allowance from their employer. In the majority of cases the case, an HRA is the amount the employer gives an employee to pay for the costs of their housing. The salary and the place of residency determine the amount. Based on the specific circumstances, HRAs may be fully exempt from tax. Employees who are salaried can take advantage of this exemption and pay lower taxes if they reside in a rental house.

Also Read-List Of 6 Income Tax Saving Investments in Section 80C

How to Calculate Your HRA Tax Exemption

Here in this article, we will talk about the HRA calculation and how the tax can be fully or partially exempted depending on the situation.

The Employer Is Required to Pay the Employee the Hra, or A Part of It.
• The HRA is calculated based on the monthly rent paid.
• The HRA is an allowance that is not taxable, so it is not subject to income tax.
• The HRA is given to the employee in lieu of the employer paying the employee’s share of the rent.
• The HRA is generally paid to the employee at the start of the month.

Section 44ADA: A Simple Guide To Presumptive Taxation Scheme.

What is House Rent Allowance (HRA)?

It is important to note that the House Rent Allowance (HRA) is a component of income under the head Salary. It is a form of compensation that is provided to the employee by the employer in the event that they can get rented accommodation.

HRA Tax Exemption Rule

A Minimum of The Following Qualifies for Hra Deduction:

  • HRA actually received
  • For residents of metro cities, 50% of salary, or 40% for non-metro residents; and
  • Actual rent paid should be less than 10% of basic salary + DA

A person/employee is only entitled to the tax benefit if they live in rented accommodation and if they occupy the rented residence during the period of time when it is rented.

You will not be able to claim the house rent allowance as a tax deduction if you choose the new tax regime from FY 2020-21 (AY 2021-22).

Conditions to Claim HRA Exemption 

Rented Accommodation: You should have stayed in rented accommodation.

Rent Payment: You should pay rent to the owner regularly.

Ownership: The accommodation or premises are not owned by you or any of your family members.

Proof of Rent: You should produce all the rent receipts as proof of actual payment.

Rent Receipt: If you are getting HRA up to Rs.3000 p.m. then you are not required to produce the rent receipt. 

Rent Over Rs. 1 Lakh: In the case of a tenant paying more than Rs 1 lakh in a year as a rent, the tenant will be required to provide their landlord’s PAN to be able to take advantage of HRA exemptions. HRA exemptions may be lost if you fail to do so.

Rent Paid to NRI: It is the tenant’s responsibility to deduct 30% TDS before paying rent to NRI landlords.

HRA for Self-Employed Individuals: HRA exemptions are only available to salaried employees with HRA components in their salary packages. HRA exemptions are not available to self-employed individuals. However, self-employed individuals can claim the deduction under section 80GG.

Salary Including for Calculation HRA: The salary includes dearness allowance if the terms of employment so provide (e.g. where it is taken into account while calculating P.F. & allowance etc.) but exclude all other allowances and perquisites.

Rent paid to your parents: You can claim the HRA tax exemption if you live with your parents and pay rent to them. In order to avoid rejection of your claim by the tax department, it is advisable that you have documented proof of your claim, such as rent receipts, financial transactions, and rental agreements.

Own a house but live elsewhere: When you occupy a rented property but own a house, you can still claim HRA benefits if you are working in another city. The HRA exemption cannot be claimed by a person who receives HRA but lives in his own apartment. The whole HRA amount received will be taxable in your hands.

How to Claim HRA Benefit

  • You must provide your employer with a rent agreement and/or rent receipts in order to avoid excessive TDS deductions.
  • The benefit is still available to you even if you forget to submit rent receipts/rent agreements to your employer.
  • HRA benefits can be claimed when you file your income tax return, and any excess TDS can be claimed as well.
  • Rent receipts and proofs of rent paid should be kept since the tax department may ask for them to authenticate your claim.

Examples to Clear the Concept of HRA Calculation 

Mr. Tarun has rent-paid accommodation in Delhi. The following numbers will help Tarun to calculate the exemption of HRA.

ParicularsAmount (P.A.)
Basic Salary500000
HRA90000
Rent Paid80000
Now find the least of the following for exemption
Actual HRA90000
Rent Paid – 10 % of Salary i.e [Rs.80,000 – Rs.50,000]30000
50% of Salary (As in Delhi)250000
So, HRA exemption is Rs.30,000 and taxable amount is (Rs. 90,000(HRA) – Rs.30,000(Least of above)) = Rs.60,000

Conclusion:

We hope you enjoyed our blog on how to calculate your HRA tax exemption in 2022. If you’ve been looking for information about your HRA tax exemption for the years leading up to 2022, then we hope this blog post helps you! In the coming months, we will be uploading more information and resources that will help you calculate more accurately. If you have any questions, please don’t hesitate to reach out to us by commenting below. Thank you for reading, we would love to hear from you!


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Hello, I am C.K. Gupta owner of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.

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