The Income Tax Return (ITR) filing for FY 2024-25 (Assessment Year 2025-26) is underway and it's time for the taxpayers to gather all relevant documents to claim various deductions. For salaried individuals, one of the most important aspects of their ITR filing process is the house rent allowance (HRA) exemptions.
HRA is a salary component given to employees by their employer to cover rental housing expenses. This expense can be shown in the ITR to claim deductions. This helps in reducing the total taxable income of the salaried taxpayers.
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For AY 2025-26, the Excel-based ITR filing utilities for ITR-1 and ITR-4 released by the Income Tax Department outline some changes to the reporting of income and deduction claims by salaried taxpayers. These changes pertain to home loans and house rent allowance, among others. So, it's important for the salaried individuals to carefully claim their HRA exemptions to avoid any error while filing ITR.
Key Details About HRA Deductions
It's important to note that all employees can claim HRA deductions, but not on the entire amount. The HRA deduction limit can vary depending on the city of residence. The salaried taxpayers can only claim the HRA deductions under the old regime. Those who opt for the new tax regime can't claim these deductions.
The Income Tax Department has made certain amendments to the HRA deduction claim process over the years after discovering some discrepancies. It was found that many taxpayers were inflating HRA amounts to receive larger tax deductions. Additionally, some individuals were submitting fake rent receipts and documents without actually staying in rented homes.
The HRA exemption norms require taxpayers to submit the PAN card details of their landlord if their annual rental expense exceeds Rs 1 lakh. To be clear, if the annual rental expense is below Rs 1 lakh, taxpayers are not required to submit the PAN of the landlord.
What If The Landlord Doesn't Have a PAN Card?
Submitting PAN card details of the landlord streamlines HRA claims and simplifies the ITR process. However, if the landlord doesn't have a PAN or refuses to share PAN details, employees must submit a written declaration with the landlord's name and address. This helps salaried taxpayers avoid potential issues related to incorrect or incomplete HRA reporting in the future.
How Much HRA Can Be Claimed By An Employee?
The HRA exemption is calculated as the lowest of the following three amounts:
1. Actual HRA received from the employer
2. 50% of (Basic Salary + DA) for metro cities and 40% for non-metro cities
3. Rent paid minus 10% of (Basic Salary + DA)
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