At the end of every financial year, filing the income tax return is mandatory for all individuals who have an active income. However, one of the tax-saving options available for all individuals who have an income is to use the HRA deduction claim to their advantage. The HRA deduction amount can either be used for a partial exemption or complete exemption from taxes.
The house rent allowance is calculated based on your salary, the city you live in, and the percentage of dearness allowance applicable to you. Employers don’t need to give dearness allowance and in that case, the HRA deduction amount is approximately 40 to 50% of the basic salary of an employee.
Now, even though claiming against your HRA deduction is your right, there are various reasons that can force the income tax officer to reject your HRA claim. So, it is important to keep the correct documentation ready and have proper knowledge about the dos and don’ts required to ensure that your next HRA claim is not rejected.
Let us discuss some of the important pointers to keep in mind below.
Things To Remember To Avoid HRA Claim Rejection
- The first and the most important prerequisite for an HRA claim is a valid rental agreement. To apply for an HRA claim, you need to submit a proper rent agreement with your landlord to the employer as the claim is based on it entirely.
- Moving on, to claim your HRA exemption on the HRA deduction, it is important or rather mandatory to submit the receipts of the rent paid to the landlord to the employer to support your claim application.
- Another important prerequisite to avoid rejection of HRA claim is to submit the original PAN card of your landlord to the employer. This is applicable for all employees who pay an amount of Rs. 1 lakh and above every year.
- You also need to ensure that you physically reside in the property you wish to claim under your HRA deduction allowance. Additionally, try and avoid cash payments as bank payments or online payments have valid proof to show completion of a transaction.
- The next important thing is to declare the number of tenants living or sharing the rental property and the division of rent amongst each as it is necessary during HRA claim.
- Lastly, always remember to deduct the TDS of 5% from the payable rent amount when your rent amount is more than Rs.50,000 a month. If you fail to do the same, a penalty of Rs.200 along with an interest of 1 to 1.5% for every month will be levied to you under the tax.
Overall, the option available from the government to claim tax exemption on your HRA deduction is all in your favor provided you ensure that all the above-mentioned necessary prerequisites are completed before you file for an HRA claim. One other important thing to remember is to ensure that the mentioned salary and the payable salary are the same amounts as a mismatch in the same can also further delay your HRA claim from the government. If you still have doubts, click here to learn more about HRA and how HRA deduction is calculated.
Honest communication and proper documentation are the two key things that you need to successfully file for an HRA claim and benefit from tax exemption easily. It is your deserving right that is proposed by the government so all you need to do is stick by the laws and enjoy the multiple benefits as an employee of the country. If you have any doubt, reach out to multiple online platforms like Turtlemint for further clarification to ensure no unexpected error delays your HRA claim in the future.