House Rent Allowance: 3 Errors Salaried Persons Often Do While Claiming HRA As A Tax Deduction, Read More

 House Rent Allowance: 3 Errors Salaried Persons Often Do While Claiming HRA As A Tax Deduction, Read More

Residence Allowance: If you work, you must be receiving the Residence Allowance. This is a significant portion of the pay that helps the employee save money on taxes. The HRA deduction benefit will be lost if these 3 errors are committed, and significant tax would need to be paid.

House Rent Allowance: If you have a job, you must be aware of and utilising the House Rent Allowance. This is a significant portion of your compensation that is offered as an allowance.

Those who are paid a salary must file an HRA. Your allowance for housing rent is tax deductible. You must pay tax on this allowance if you do not live in a rental home. According to section 10(13A) of the Income Tax Act, HRA is deductible. Its potential is limitless. Your salary and the amount of HRA your employer provides will determine the amount of HRA deductions that are available.

Avoid the following 3 errors.

According to tax expert Chirag Chauhan of CA Chauhan & Co. Chartered Accountants, salaried people frequently make three crucial errors when claiming HRA, which leads to complications down the road. Avoid making these errors.

Ensure that you have a lease agreement.

You are eligible for Home Rent Allowance if you pay rent for a home that was built in a family member or relative's name. The presence of a relative's home frequently prevents rent agreements from being reached. Your employer or the tax office may catch you, in which case the HRA deduction benefit will be lost. In this situation, you'll need to pay tax on this sum.

Checks or an online transfer

Only transfer funds from your account to the bank account of your landlord if you rent your home. Cash should not be used to pay rent. If you pay in cash more than Rs. 5000, Each receipt must have a revenue stamp on it. The landlord's PAN is not necessary if the amount of rent you pay is less than Rs 1 lakh in a fiscal year. If the rent is paid more than this, a PAN number must be shared.

Rent receipt is required.

You must obtain the landlord's rent receipt in order to deposit the rent. An invoice for the rent may be created by your employer. The rent receipt won't be accepted if this issue is brought up with the tax department. Further documentation is required by the tax division. Frequently, the renter pays a higher amount of rent than stipulated in the lease. In such circumstances, it is possible for the tenant to deposit the additional sum in cash. Only the amount for which you have the rent receipt will be eligible for the deduction in this situation.

How is the HRA tax exemption determined?

How much HRA the employer provides.

>> If you reside in a metro area, your basic pay and dearness allowance will be split 50/50.
>> If you reside in a non-metropolitan area, your basic pay and dearness allowance will be worth 40%.
>> You should pay less than 10% of your base earnings and dearness allowance towards your rent.

The minimum sum in the four aforementioned circumstances will be excluded from tax.