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HRA (House Rent Allowance) - Calculation and Tax Exemption Rules in 2019 - YouTube
Channel: Asset Yogi
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Namaskar, my name is Mukul, and welcome to asset Yogi.
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Friends, today we are going to talk about House Rent Allowance.
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Which we call HRA in short form.
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If you are a salaried employee, you must have seen in your salary structure
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that there is an HRA component on which you can claim tax reduction.
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That is, you can remove that portion from your income on which tax will not be levied.
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But people get confused about what portions can be reduced.
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I will clarify that calculation in this video.
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Apart from this, if you are not a salaried employee,
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If you are self-employed and you pay house rent, then how much tax reduction can you claim?
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We will also see this.
Other than this many people have a query that
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Can we claim tax reduction simultaneously on both HRA and home loans?
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absolutely you can claim but how, we will also discuss it.
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Many times people have a query that if we live in our parents' house,
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So can we pay rent to them?
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Along with it can we claim a reduction for our HRA
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so in this video, I will try to answer all these queries
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stay tuned to this video
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Music
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Let us first talk about Salaried Employees.
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Salaried employees cover under section 10 (13A)
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And HRA reduction is available on a minimum of three numbers.
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And what are these three numbers?
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First is actual HRA
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the amount of house rent allowance in your salary
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The second number you have to calculate is on your basic salary
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If you live in a metro city
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Such as Mumbai, Delhi, Kolkata or Chennai.
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So you will calculate 50% of your basic salary
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And if you live in a non-metro city
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That is, apart from these four cities, if you live in any other city
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So you will calculate 40% of your basic salary.
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So you will get this number.
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And if you are a government employee
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So you can add your Dearness allowance along with this basic.
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You can claim 40% - 50% of that.
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So we've got these two numbers.
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The third number will be rent minus 10% of basic.
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Deduct 10% of the basic from the rent you are paying.
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And if you are a government employee then you can claim 10% DA here too.
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So when you will get these three numbers.
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Whichever of these three is the minimum
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you will get a 10% deduction on the House Rent allowance
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Let us understand this with an example
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Suppose someone's salary is ₹ 60,000 per month.
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out of which the portion of basic is
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I am assuming Basic + DA.
Let's say ₹20,000 per month
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Let us assume HRA is ₹12,000
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and let's assume that the rent of this person is ₹ 50,000 per month
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So let's calculate these three and see.
What is the Actual HRA here?
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This is ₹12000.
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And let's assume this person lives in a metro city like Delhi-Mumbai.
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So let's consider 50% of basic.
And the basic is ₹20,000.
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So what will be 50% of this,
it will be ₹10,000
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So we got our second number.
And the third number will be our rent
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that is 15,000 minus
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10% of the basic of 20,000 will be 2,000
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So from 12,000, we will subtract 2,000.
So our third number is 13,000.
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So now we have these three numbers:
13,000,10,000 and 12,000
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then which of these is the minimum number
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10,000 is the minimum number then we will get an HRA deduction on it.
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So this is a simple calculation
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You will get the HRA deduction on the lowest number out of the three.
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But this 10,000 is per month so we will multiply it by 12.
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So how much will you get the total deduction in a year?
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You will get a deduction of ₹1,20,000.
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So similarly when you have calculated all the three numbers on your salary,
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you will get an idea of how much HRA deduction you will get.
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So we discussed Salaried Employees.
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There is an HRA component in their salary structure.
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Now let's talk about non-salaried classes.
They are covered under section 80 GG.
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So in this clause, if you are a professional, if you are self-employed, you are covered
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or you are also a salaried employee and there is no HRA component in your salary structure,
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then also you will be covered in this clause and you can claim your HRA deduction
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Here also you have to calculate a minimum of three numbers.
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Which numbers are these?
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The first is to subtract annual rent from 10% of income
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You will get your first number.
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The second is 25% of total income.
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Whenever you will calculate your income
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So don't include your long term capital gains or short term capital gains
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So the third number is your ₹ 5,000 per month. This is fixed.
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So over here I would say that there is a slight loss.
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Only ₹5,000 number is kept here
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It's not much because if someone is paying ₹20,000 rent
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So it is not sufficiently covered because the
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minimum number of ₹ 5000 per month imposes a constraint.
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In case of non-salaried, you can claim a maximum deduction of ₹5000
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Even if this number is high.
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Second, you have to remember one more condition in this clause.
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You or your spouse do not own a house
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in the city you are living
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or in the city, you are working
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If you own a house in that city you are living then you can not claim HRA reduction.
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So we discussed HRA reduction for both salaried classes and non-salaried classes.
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Now let us look at the case of HRA and Home loan
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This question comes from many people.
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Can we claim HRA reduction and home loan reduction together?
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Definitely, you can.
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Maybe you have a house in Mumbai and you work in Delhi.
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And maybe you are living on rent in Delhi
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So you can easily claim for both
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What are the deductions you can claim in such a case?
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First, you can claim an HRA deduction
As we talked about in section 10 (13A)
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And as we also talked about section 80 GG for salaried and non-salaried.
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So I write section 80 GG here as well.
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In this, you can claim HRA deduction
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Also, suppose you have an ongoing home loan
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on the house, you have bought in the different City
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You can also claim on its principal
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And it is covered under section 80c.
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Section 80c covers a lot of investments
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The overall limit of section 80c is 1.5 lakh per annum
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let's say if you have made any other investment of ₹50,000 in 80C.
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So you will be able to claim a deduction of up to one lakh on the home loan principal.
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Apart from this, under section 24 you can also claim the deduction on the interest of the home loan.
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If your property is self-occupied then you can show interest up to 2 lakhs in it
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And if you have a loss from the property.
Suppose you have given the property on rent
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So in that case also the limit of loss from the property is up to ₹2,00,000 per annum
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Home loan interest can also be claimed for a tax deduction.
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Apart from this, section 80 EEA has also been introduced this year.
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If you buy a house up to 45 lakhs under Affordable Housing and take a home loan for that
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So additionally you can claim deduction on the interest up to 1.5 lakhs.
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If we add both
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2 lakhs + 1.5 lakhs will be 3.5 lakh
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If you are planning to buy a property this year
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So you will be able to claim an interest deduction of up to 3.5 lakhs
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I will make a separate detailed video on the tax benefit of a home loan
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Now let's move to our next query
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Many people ask, can we pay rent to our parents?
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You can pay rent to your mother or father.
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But you must do an actual transaction because it is necessary to have a proof
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And when you do this transaction every month
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then it will be reflected in their account and
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It will reflect in their income.
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And you must also file their ITR
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You should have your rent receipt prepared.
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Collect rent receipt from your mother or father
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And also file their ITR
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Include rental income in their total income.
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You may be in the 30% tax bracket
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And let's say your parental property is owned in your mother's name
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Maybe she is a housewife, so you can pay rent to her
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And nowadays there is no tax on income up to ₹5,00,000
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So your entire tax will be saved.
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This is a completely legal method and a lot of people do it too.
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But here you should remember one more thing: you can pay rent to your parents but
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you cannot pay rent to your spouse i.e. your husband or wife
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and you can not claim HRA deduction on that.
I hope this query must have been resolved.
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Apart from this, I also tell you some other important points
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related to house rent allowance.
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If your annual rent is more than one lakh, then you have to give PAN to the landlord.
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And if the Landlord does not have PAN,
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then you will have to take a declaration from the Landlord.
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If you have not submitted the rent receipt to your company
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if for some reason you forgot
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Still, you can claim an HRA deduction.
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When you will file ITR for that year
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whatever is your rent, you can claim it in the form of an HRA deduction
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And maybe if you have not given the rent receipt in your company
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So they have deducted your tax.
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So even in such a case, when you file your ITR, you will get back your tax return,
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but at the same time, you must keep your rent receipt as a proof
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By chance, if any query comes from the Income Tax side
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So you were able to resolve that.
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I hope that after watching this video, many of your queries related to HRA gets resolved.
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So if you like this video then please like and share it
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With your friends or family members
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Maybe they also have some queries
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They will also be benefited from watching this video.
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And there will be some tax savings.
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If you have any comments related to this channel or related to the video
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So you can comment below.
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So see you in the next such informative video
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Till then keep learning, keep earning be happy as always
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