ITR Filing: Maximise Rent Tax Savings for 2023-24; Here Know How?
House Rent Allowance (HRA) is a common tax benefit for salaried people who rent homes. In the financial year 2023-24, few changes were introduced. These changes along with the Budget 2023 and beginning April 1, the default new tax regime significantly simplified exemptions. Here’s how you can get the most out of your rent-related tax benefits. Avoid mistakes and File your Income Tax Return (ITR) accurately.
Claiming HRA When Filing ITR
If you didn’t choose the old tax regime in your investment declaration in April, your company might have calculated your taxes under the new regime. This doesn’t include exemptions like HRA. You can still claim HRA. When filing your ITR before July 31.
To claim HRA exemption:
The tax-free HRA will be the least of these-
- 50% of your basic salary plus dearness allowance (DA) if you live in a metro city or 40% for non-metros.
- Actual HRA received
- Actual rent paid minus 10% of your basic salary and DA.
You don’t need to submit documents when filing the rent receipts. However, it is wise to keep the rental agreement just in case. If your rent is more than Rs.50,000 per month. You must deduct tax (TDS) before paying your landlord.
Tax Benefits Without HRA
You can get tax benefits under Section 80GG even if you’re self-employed or do not get HRA as part of your salary. This section lets you deduct the rent paid. Even without HRA.
To claim Section 80GG benefits:
The deduction is the least of these-
- 5,000 per month
- 25% of your total income
- Actual rent paid minus 10% of total income
- You can’t claim this benefit if your spouse, minor child or Hindu Undivided Family (HUF) own a house in a place where you stay.
You can claim HRA tax exemption if you are paying rent to your parents.
Claim HRA Exemption
Rent paid by you is considered as your parent’s income. Which they need to declare. Check the impact of tax on your parents as they can fall into a lower tax bracket. This may result in a decrease in overall tax. Do remember to provide PAN details of your landlords (parents) when you claim HRA benefits. Keep all the documents. Be clear as the Income Tax Department can keep track of transactions.
Keep documents ready. The I-T department can ask for it anytime. It can be tricky if you are living in your parent’s home. And they rent it. It is better to have a direct rental agreement with the landlord in this case.
