In the lead-up to Budget 2024, anticipation is building for potential adjustments to exemption limits by the finance ministry, offering a possible relief from tax burdens. Notably, House Rent Allowance ( HRA ) stands out as a crucial tax exemption, irrespective of property ownership. Even if the dwelling belongs to one’s spouse, individuals can still claim HRA as part of their salary.
Section 10(13A) of the Income Tax Act enables employed individuals to seek exemptions for House Rent Allowance ( HRA ). Given the significance of this allowance in one’s income, adhering to the company’s guidelines on HRA claims is crucial. HRA is a part of your salary income and therefore, it is initially considered as your taxable income. However, if you live in a rented accommodation, you can claim a tax exemption either – partially or wholly under Section 10(13A) of the Income Tax Act. This is popularly known as HRA exemption.
If you don’t live in a rented accommodation, this allowance is fully taxable. To qualify for HRA exemption, you need to fulfill the following criteria: 1. Reside in rented accommodation. 2. Have HRA included in your CTC. 3. Provide valid rent receipts and evidence of rent payments. The calculation for HRA exemption is contingent upon factors such as salary, rent payments, HRA received, and the employee’s city of residence. Ensure compliance with these conditions to maximize your HRA benefits.
It is essential to understand that the HRA exemption is not applicable in the new tax regime. To avail oneself of the tax benefits associated with rent allowance, one must adhere to the provisions of the old tax regime. For a deeper understanding of HRA exemptions, let’s delve into six key points: 1. Exemption under HRA can be claimed for rent paid to a spouse. 2. Recent court decisions, such as the June 2023 ruling by the Income Tax Appellate Tribunal ( ITAT ) in Aman Kumar Jain’s case, emphasize that rent paid by a man to his wife qualifies for HRA, allowing for tax exemption. The ruling rejects the notion that a husband cannot pay rent to his wife.