Income tax

Save Big on Taxes: How to Claim HRA Exemption under Section 10(13A)

This blog post provides a detailed guide to Section 10(13A) of the Income Tax Act, which allows salaried individuals to claim exemption on House Rent Allowance (HRA) received from their employers. The post covers the eligibility criteria, calculation, and documents required to avail this tax benefit, making it a valuable resource for individuals looking to optimize their tax planning.

Unlocking Section 10(13A) Benefits: An All-Inclusive Guide to House Rent Allowance (HRA)

Rent is one of the biggest costs you have as a salaried worker. The good news is that you can claim an exemption on your employer-provided House Rent Allowance (HRA) under the Income Tax Act of 1961. A crucial provision that lowers your taxable income is Section 10(13A), which enables you to claim an exemption on HRA. We'll go into the specifics of Section 10(13A) and discuss how you may take full advantage of this exemption in this blog post.

House Rent Allowance (HRA): What is it?

Your employer may provide the House Rent Allowance (HRA) in your salary to assist you in covering your rent costs. HRA is a taxable part of your compensation and is often calculated as a percentage of your base pay. Employers often offer HRA to their staff members who must reside in a specific city or area in order to do their jobs.

Section 10(13A): What is it?

The Income Tax Act of 1961 contains a section 10(13A) that enables you to claim an exemption on HRA that you receive from your employer. The purpose of this section is to offer relief to salaried people who rent their homes. Those who pay rent for a residential property and receive HRA as part of their wage are eligible for the exemption.

Qualifications for Section 10(13A)

In order to be eligible for exemption under Section 10(13A), you have to fulfill the following requirements:

You have to be an employee with a salary.
HRA must be paid to you in addition to your income.
You have to reside in a rented space.
The city in which you work cannot be your home.
For the same period, you cannot have claimed an exemption under Section 80GG (Rent Paid).

How to Determine the Section 10(13A) Exemption

The following formula is used to compute the exemption under Section 10(13A):

Minimum of the following applies to exemption:

Real HRA that you were given by your employer
40% of your base pay (in non-metropolitan areas) or 50% of your base income (in metro areas)
The amount of rent paid less 10% of your base pay

Metropolitan Areas

In accordance with Section 10(13A), metropolises are described as:

Mumbai, Delhi
Chennai's Kolkata

Cities That Are Not Metro

Non-metropolitan cities are any other cities than metropolises.

As an illustration

Assume you have a base salary of ₹50,000 per month and that you reside in a metropolis. You pay ₹30,000 in rent each month and your company gives you an HRA of ₹20,000.

Minimum of the following applies to exemption:

Received actual HRA: ₹20,000
50% of the starting pay scale: ₹25,000
Rent received less 10% of base pay: 30,000 minus 5,000 equals 25,000.

The exemption in this instance would be ₹20,000, the lowest of the three amounts.

Documents Needed to File a Section 10(13A) Exemption Claim

In order to be eligible for exemption under Section 10(13A), you must submit the following paperwork:

Lease agreement or rent agreement
Receipts for rent
Evidence of rent payment, such as cancelled checks or bank statements
A certificate from your company attesting to the fact that the landlord's PAN card was obtained by the HRA (if the annual rent paid exceeds ₹1 lakh)

Advice and Safety Measures

Make sure you retain all the paperwork required in order to submit a Section 10(13A) exemption claim.
Make sure your company gives you a certificate acknowledging the HRA that you have received.
Make sure you have a legitimate rent agreement and rent receipts to back up your claim if you are paying rent to a relative.
Note that rent paid for residential accommodations only qualifies for the exemption under Section 10(13A); rent paid for commercial or industrial uses does not.
You cannot claim exemption under Section 80GG (Rent Paid) for the same time if you are claiming exemption under Section 10(13A).

Typical Errors to Steer Clear of

Failing to keep up with necessary records, like rent receipts and agreements.
Failing to get a certificate from work attesting to the HRA you were given.
Requesting an exemption under Section 10(13A) in the absence of qualifying requirements.
Failing to account for the 10% basic salary deduction when determining the exemption.

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Note-All the aforementioned information in the article is taken from authentic resources and has been published after moderation. Any change in the information other than fact must be believed as a human error. For queries mail us at marketing@myitronline.com

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Krishna Gopal Varshney

An editor at apnokaca

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Krishna Gopal Varshney, Founder & CEO of Myitronline Global Services Private Limited at Delhi. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. Visit our website for latest Business News and IT Updates.

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