Income Tax Guide: The date of filing income tax is coming closer, so tax calculation has also started. Taxpayers are busy calculating which tax regime is more beneficial. Can the new tax regime save them more tax, or is there more benefit in the old tax regime? Meanwhile, a big question is also can a person claiming house rent allowance (HRA) under the old tax system claim tax exemption on the maintenance fee paid to the society.
Nowadays, a large number of people live in housing societies, where they also have to pay a maintenance fee. In a way, this is also a part of the rent, but it is not considered as rent. So can the benefit of tax exemption be availed on this too? An attempt has been made to answer this in a report by experts.
According to experts, salaried employees are eligible to claim HRA exemption if certain conditions are met. Such exemption is given in respect of any allowance granted by the employer specifically to meet the expenditure incurred on payment of rental. HRA exemption should be restricted to rental payment only. In cases where the tenant requires additional payment in the form of maintenance charges, electricity bills, water bills, etc., such amounts, which do not qualify as rental, should not be made part of the expenditure eligible for HRA exemption.
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Usually, HRA is included as a component in the salary structure of an employee. A salaried employee can claim tax exemption on HRA if he is living in a rented house and receives HRA as part of his salary. HRA tax exemption can be claimed under Section 10(13) of the Income Tax Act. The income tax law defines the amount of HRA tax exemption an employee can claim.
The maximum amount of HRA that can be claimed depends on the basic salary, city, and actual rent, whichever is lower of the three. The total amount of HRA received by the employee from the employer is
50% of salary if living in metro cities or 40% of salary if living in non-metro cities. The actual rent paid is 10% of salary.
HRA exemption can be claimed by submitting proof to the employer or while filing an income tax return. However, if proofs related to HRA are submitted to the employer, a lower tax will be deducted from the salary. Also, the tax exemption is calculated by the employer and is reflected in Form 16. On the other hand, if HRA tax exemption is claimed in the ITR, the salaried employee has to calculate the tax exemption manually.
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