The process of claiming House Rent Allowance (HRA) exemption in the old tax regime involves several key considerations, according to experts. Firstly, HRA is not fully exempt from tax and is applicable exclusively to residential premises. The exemption is determined based on the least of the actual HRA received, 40 per cent of basic salary for non-metro cities or 50 per cent for metro cities, and actual rent paid minus 10 per cent of basic salary.
Documentation plays a crucial role in claiming HRA exemption, say experts. Employees need to provide evidence, including details of rent paid, the homeowner name and address, and the homeowner’s PAN if the rent exceeds Rs 1 lakh. Rent receipts exceeding Rs 5,000 per month should be affixed with a revenue stamp.
HRA benefits are contingent on the actual payment of rent for the occupied residential accommodation, not owned by the taxpayer. The calculation of HRA benefits is based on the period for which rent is actually paid, not the entire year.
For salaried individuals paying rent exceeding Rs 50,000 per month, it is crucial to ensure that TDS at 5 per cent is deducted and deposited according to section 194IB. Lastly, caution is advised against making false claims or deductions that do not apply. Accuracy is paramount in declaring deductions.
Personal finance expert Arpit Suri stated, “In the realm of HRA and home loan benefits, it is essential to understand that there is no restriction on claiming simultaneous tax benefits for both in the same year, provided conditions under tax laws are met. The process of claiming HRA exemption may seem complicated, but with the right documentation and understanding of the rules, individuals can ensure they are taking advantage of the tax benefits available to them.”
In conclusion, understanding the ins and outs of claiming HRA exemption in the old tax regime is crucial for salaried individuals. Proper documentation and adherence to the rules can ensure that individuals are maximizing the benefits available to them while avoiding potential tax troubles. It is important to seek advice from financial experts and stay informed about any updates or changes in the tax laws to ensure compliance and accuracy in claiming deductions.