HRA tax-saving secrets every employee should know
What's the story
For many salaried employees in India, understanding House Rent Allowance (HRA) can feel as confusing as navigating a maze with no map! Yet, HRA holds the key to reducing your tax burden significantly. Wondering how to unlock these savings?
Today, we break down the rules, tips, and common pitfalls of HRA exemptions in a way that's easy to digest—and might just leave more money in your pocket this year.
Let's decode your rent-to-tax savings like never before!
Eligibility
Know your eligibility
In order to claim HRA exemption, you need to fulfill two conditions:
You should be a salaried individual receiving HRA as a component of your salary package.
You must be residing in rented accommodation.
If you live in your own house or don't pay any rent, you are not eligible to claim this exemption.
Calculation
Calculate your exemption correctly
The quantum of HRA exemption is the minimum of the following three amounts:
the actual HRA received from your employer;
50% of your basic salary if you reside in a metro city (40% for non-metro cities); or
the excess of rent paid over 10% of your basic salary.
By calculating it correctly, you can claim the maximum benefit you are entitled to.
Documentation
Submit proper documentation
In order to claim HRA exemption, you need to submit rent receipts along with a copy of your rental agreement to your employer.
If your rent payment exceeds ₹1 lakh per year, you are required to submit your landlord's PAN as well.
Make sure all your documents are correct and submitted on time as per your employer's deadlines.
Planning
Plan your rent and salary structure wisely
Negotiate your salary smartly to get the most out of HRA
In metro cities, make sure HRA is 50% of basic salary to maximize tax savings. If you live in non-metros or pay less rent, decrease this ratio to optimize benefits.
This way, you can make an informed decision, stay within the tax laws, and save the most.