While filing income tax, you can claim a substantial tax exemption by claiming HRA, this year the Finance Minister has made new rules for HRA by changing the ITR rules. Let’s know about these in detail
Finance Minister Nirmala Sitharaman had increased the standard deduction along with exemption in the Union Budget for salaried taxpayers filing Income Tax Return (ITR) for the financial year 2023-2024. Under the same new tax system, the tax exemption limit has also been increased.
Even after increasing the tax limit, if your income is coming in the tax category, then you can save tax by making multiple claims under the old tax system. You can also save tax by claiming house rent allowance under the old tax regime.
It is important to understand how much tax salaried individuals can save on House Rent Allowance (HRA) and the rules for claiming it.
What is HRA
House Rent Allowance (HRA) is an allowance given by a company to an employee in lieu of payment of house rent expenses. HRA is included in the salary component that the company gives to the employee. An employee drawing salary under regulation number 2A of the Income Tax Act is eligible for HRA exemption under section 10(13A) of the Income Tax Act. This exemption is not given under the new tax regime.
Calculation of tax exemption on HRA
50% of basic pay + DA for metro cities
40% of basic pay + DA for non-metro cities
Actual rent paid less than 10% of basic pay + DA
What are the benefits of HRA
Those people who do not live in their own house and live in a rented house are benefited through HRA. For HRA i.e. House Rent Allowance, people have to give information to their employer after which they can claim HRA.
