House Rent Allowance: Three blunders salaried individuals make while claiming HRA as a tax deduction are detailed below

 House Rent Allowance: Three blunders salaried individuals make while claiming HRA as a tax deduction are detailed below

Update on House Rent Allowance: You must be receiving the benefit of House Rent Allowance if you work. This is a significant portion of the pay that helps save taxes. Should these three errors be committed, the HRA deduction would be terminated and a substantial amount of tax will need to be remitted.

Allowance for House Rent: If you work, you should be aware of and using the Allowance for House Rent. This is a sizeable portion of your pay that comes in the form of an allowance. A salary earner must submit an HRA claim. You get a tax advantage on your rental income. You must pay tax on this allowance if you do not reside in a rental home. In accordance with Income Tax Act section 10(13A), HRA is eligible for the deduction. This has no bounds to it. Your income and the amount of HRA that you get from your company determine how much may be deducted from your HRA.

Steer clear of the following three errors.

According to tax expert Chirag Chauhan of CA Chauhan & Co Chartered Accountants, salaried people often make three major blunders while claiming HRA, which puts them in legal hot water down the road. Steer clear of these errors.

Don't forget to draft a lease.

You will be eligible for a house rent allowance if you reside in a home that is owned by a relative or other family member. It often occurs that no rental agreement is established because of the relative's home. The HRA deduction advantage will be lost if your employer or tax authorities notices anything suspicious. You will be required to pay tax on this amount in this scenario.

Use a checkbook or an online transfer

If you rent your home, you should only move funds from your account to the landlord's bank account. You shouldn't pay rent with cash. Every receipt that you pay with cash for more than Rs 5000 has to have a revenue stamp on it. It is not necessary to have the landlord's PAN if you pay rent of up to Rs 1 lakh in a financial year. If the rent is paid in excess of that, the PAN number will need to be disclosed.

Rent receipt must be obtained.

Make sure you get the rent receipt from the landlord as soon as you deposit the money. The rent receipt might be prepared by your workplace. The tax department will not accept the rent receipt if this subject is brought before them. The tax division requests further proof. Tenants often pay more rent than what is specified in the lease. It's probable that the renter may make extra cash deposits in certain circumstances. The advantage of the deduction in this case will only apply to the amount for which you have the rent receipt.

How is the HRA tax exemption determined?

The amount of HRA that the company provides.

>> If you reside in a major city, you will get 50% of your dearness allowance and base pay.

>>40% of your base pay and dearness allowance if you reside in a non-metropolitan area.

Less than ten percent of your base pay and dearness allowance should have gone toward rent.

The least of the four amounts listed above will not be subject to taxation.