How to get benefit of
HRA in Tax Planning..?
For a salaried
individual, HRA (House Rent Allowance) is important part of the salary slip. In
our taxation rule, there are 3 type of tax deduction. First is the amount paid
as a rent, the second is amount paid as principal amount of home loan and last
is interest paid on home loan. Most of time, they don’t know how to calculate
the exempted amount of HRA. For this they totally depend on their office
accountant or friends. I am getting many friends and client call about HRA
calculation. So today, I am going to discuss in detail about the HRA.
There are many
doubts in the people’s mind about home loan and home rent exemption. I am
taking one by one those doubts. The most common doubt that is HRA exemption
applicable for both salaried individuals and self- employed. The answer is HRA
benefit is not available to self-employed professional, as they don’t earn
salary but they can claim benefits of house rent expenses according under
section 80GG with subject to certain conditions.
The other most
asked query is can anyone take both HRA and home loan benefit. The answer is
yes. If you are paying rent, you can claim HRA benefit and if you are earning
rent income from in the name of your property you can also claim the interest
benefit. There is no direct connection between HRA and home loan tax benefit.
Some common situation
faced by salaried person:
·
If the person live in own house then he cannot claim HR exemption. If he
is paying home loan and paying EMI then he can claim tax benefit on principal
mount and interest paid portion.
·
If the person has bought under construction property and staying in
rented home in the same city then he can avail tax benefit of HRA and principal
paid but cannot get benefit of interest till construction completed. Once
construction complete, he can claim all interest paid during construction in 5
equal installment in the next 5 year from complete construction year.
·
If the person has bought home in other city and stayed in rent in the
other city then he can claim HRA exemption and will get benefit of paying home
loan of principal amount and interest paid.
·
If the person is paying home loan for home which is ready for occupation but
not residing in it due to some reason like work place far away then he can claim
tax exemption on HRA and tax benefit of home loan including principal and
interest. You have to still pay tax on notional rent income even if your home remains
vacant during the year. If you are getting rent then the rent income will add
in income from other sources and taxable according to specific rule.
How to calculate the HRA exemption amount:
Lets take an example
to understand how to calculate HRA exemption amount. Mr. A gets basic salary Rs
50,000 and HRA Rs 30,000 per month. He resides in mumbai and pays rent Rs
25,000 per month. Calculate the tax exemption amount of HRA?
There are 3
conditions and the least amount of these 3 is eligible for HRA exemption:
(A) Actual HRA received:
30,000
(B) 50% of basic salary
as he resides in metro city: 25,000 (For non-metro city it is 40% of basic
salary)
(C) (Actual rent paid) - (10% of basic salary) it means (25,000-
10% of 50,000) = 25000-5000 = 20,000
According to the rule the least of the above 3 figure is
eligible for tax exemption so exempted tax mount of HR is Rs 20,000 and taxable
HR 30,000-20,000= 10,000.
You can pay rent to
your parent and can still claim HRA exemption but in case of spouse you cannot
claim HRA benefit.
One more important
thing to remember, you have to submit the rent slip signed by owner as rent proof
to your employer.
For more detail about
any other query related investment, you can contact me through my email.
Regards,
Arvind Trivedi
Certified
Financial Planner
INTERNATIONAL CONCEPT OF WORK FROM HOME
ReplyDeleteWork from home theory is fast gaining popularity because of the freedom and flexibility that comes with it. Since one is not bound by fixed working hours, they can schedule their work at the time when they feel most productive and convenient to them. Women & Men benefit a lot from this concept of work since they can balance their home and work perfectly. People mostly find that in this situation, their productivity is higher and stress levels lower. Those who like isolation and a tranquil work environment also tend to prefer this way of working. Today, with the kind of communication networks available, millions of people worldwide are considering this option.
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Thus think over this concept and go ahead.
I can get the HRA exemption Limit in india.
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