The clock is ticking for taxpayers as the deadline to file income tax returns approaches.
Individuals have until July 31, 2023, to disclose their income earned during the financial year 2022-23 by submitting their tax returns.
Failure to meet this deadline may result in fines.
Unlocking the Benefits of HRA in Income Tax Returns
When filing your income tax returns, you can take advantage of various benefits, including House Rent Allowance (HRA).
Raghuram Trikutam, CEO of Descrypt, sheds light on the advantages of HRA under section 10(13A):
Lower Taxable Income: HRA reduces your taxable income, providing valuable tax savings.
Claiming Deduction on HRA: Even if you reside with your parents, you can claim HRA deduction by submitting proof of rent payment.
HRA Tax Benefit for Home Loan Payers: You can claim HRA tax benefit even if you are paying home loan EMIs, as long as the property is not in your city of employment or residence.
If the property is in the same city, a valid explanation is required to claim the exemption.
Consideration for Salaried Employees: Salaried employees living in rented accommodations should consider claiming HRA u/s 10(13A) to enjoy substantial tax savings.
Understanding HRA Deduction
The amount of HRA deduction you can claim depends on your city of residence:
Metropolitan City Residents (Mumbai, Delhi, Kolkata, or Chennai): Up to 50% of your basic salary.
Residents of Other Cities: Up to 40% of your basic salary.
To claim HRA deduction, submit proof of rent payment to your employer, which can include a rent receipt, lease agreement copy, or landlord statement.
The deduction can be claimed for up to 12 months in a financial year. If you have any queries, consult a tax advisor.
The Benefits of HRA
Avinash Shekhar, CEO and Founder of TaxNodes, explains that HRA is an allowance provided to individuals to cover house rent expenses, helping to reduce their taxable income.
To avail the benefits of HRA, certain rules must be followed:
Occupancy on Rent: You must have genuine rental accommodation with a tenancy agreement in your name.
Salary Structure: Pay attention to the HRA component in your salary structure, as it may vary based on terms and conditions.
Rent Certificate: Obtain a rent certificate as evidence of rent payments, provided by the tenant detailing payment details.
Tax Deduction on Salary: Utilize the HRA benefit to reduce your taxable income during tax deduction from your salary.
Tax Saving: HRA provides tax-saving opportunities by reducing your income in the financial year.
Tenancy Benefits: Renting a residence offers housing flexibility and the option for permanent residence.
Increase in Salary: Leveraging HRA benefits can result in a higher salary, leading to an improved financial situation.
Financial Eligibility: HRA can improve your eligibility for bank loans and other financial transactions by reflecting lower visible income.
Incorporating HRA into your financial planning can be a prudent choice, offering permanent residence options with tax-saving and rental benefits.
Be sure to consult your financial advisor and negotiate wisely to maximize the advantages of HRA.
