House Rent Allowance (HRA) is a crucial component of an employee’s salary package, providing tax benefits under the Income Tax Act of India. However, confusion often arises regarding the ability to claim HRA when it is not mentioned in Form 16. This document aims to clarify the implications of HRA not being listed in Form 16, explore the alternatives for claiming HRA, and introduce relevant financial products that can assist in better financial management.
What is HRA and its importance?
House Rent Allowance (HRA) is an allowance given by employers to employees to cover their rental expenses. It is part of the taxable salary but offers significant tax benefits under Section 10(13A) of the Income Tax Act, 1961. The importance of HRA lies in its ability to reduce taxable income, thus lowering the tax burden on employees.
Form 16 and its components
Form 16 is a certificate issued by employers to their employees detailing the salary paid and taxes deducted during the financial year. It comprises two parts:
- Part A: Contains details of the tax deducted and deposited quarterly.
- Part B: Provides a detailed breakdown of salary, including allowances, perquisites, and deductions.
Can I claim HRA if not mentioned in Form 16?
The short answer is yes, you can claim HRA even if it is not mentioned in Form 16. Here’s how:
Understanding the omission
If HRA is not mentioned in Form 16, it may be due to several reasons, including oversight by the employer or the employee not submitting the necessary rent receipts on time. However, this omission does not disqualify the employee from claiming HRA while filing the income tax return (ITR).
Claiming HRA while filing ITR
To claim HRA during the filing of your ITR, follow these steps:
- Calculate the eligible HRA: Use the least of the following three amounts to determine the HRA exemption:
- Actual HRA received
- 50% of the basic salary (40% if living in a non-metro city)
- Rent paid minus 10% of the basic salary
- Provide necessary documentation: Keep rent receipts and rental agreements ready. For rent payments above Rs. 1 lakh annually, the PAN of the landlord is required.
- File the claim in ITR: Enter the calculated HRA exemption in the relevant section of the ITR form. Attach the supporting documents if filing manually or keep them handy for e-filing.
Alternatives to claiming HRA
If you are unable to claim HRA directly due to the omission in Form 16, consider the following alternatives:
Claiming deduction under Section 80GG
Section 80GG of the Income Tax Act allows individuals not receiving HRA to claim a deduction for rent paid. The conditions to claim under this section include:
- The individual must be self-employed or a salaried employee who does not receive HRA.
- The individual or their spouse/children should not own any residential property in the place of residence.
- The individual must file a declaration using Form 10BA.
The deduction amount is the least of the following:
- Rs. 5,000 per month
- 25% of total income (excluding long-term capital gains and deductions under sections 80C to 80U)
- Rent paid minus 10% of total income
Home loan benefits
Another alternative to reduce your tax burden is to avail of home loan benefits. Home loan repayments offer dual tax benefits under sections 80C and 24(b):
- Section 80C: Deduction up to Rs. 1.5 lakh on principal repayment.
- Section 24(b): Deduction up to Rs. 2 lakh on interest repayment for self-occupied properties.
Explore Bajaj Housing Finance Home Loan
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