Claim rules for HRA

The following rules apply to HRA claims:

1. Your allotted HRA cannot exceed 50% of your basic salary.

2. As a salaried employee, you cannot claim the full rent you are paying. Your exemption is based on the least of the following:

   1. The actual amount allotted by the employer as the HRA.

   2. Actual rent paid less 10% of the basic salary.

   3. 50% of the basic salary, if the employee is staying in a metro city (40% for a non-metro city).

3. You can also avail tax benefits of HRA along with a home loan.

4. If you stay with your parents, you can pay rent to them and collect a receipt for your HRA claim. However, the same rules don't allow you to pay rent to your spouse and claim a tax exemption.

5. If the annual rent of your accommodation exceeds Rs.1,00,000, you must present the landlord's PAN card. If the landlord does not have a PAN card, they can provide a self-declaration.

6. If your landlord is an NRI, you must deduct 30% tax from the rent amount to be declared.

A major benefit of house rent allowance is that it reduces your taxable income, which in turn reduces the tax you have to pay.