HRA relief: The Centre is likely to expand the list of cities eligible for higher House Rent Allowance (HRA) exemption under the old tax regime, according to The Economic Times.
At present, taxpayers in big metros, including Chennai, Delhi, Kolkata and Mumbai, are eligible for a 50% HRA exemption, while taxpayers in other urban centres can claim a 40% exemption.
The proposal seeks to expand the 50% benefit to more cities, including Ahmedabad, Bengaluru, Hyderabad and Pune, as per the report. It added that other cities remain at 40%.
Why the change?
The report said the government wants to modernise HRA provision in line with evolving demographics, while keeping up with rental price increases in cities that are economic hubs.
Pune, Hyderabad and Bengaluru are major IT, manufacturing and startup centres with an increasing salaried class and higher rents.
Notably, the list of approved metros was not updated since the early 1990s, according to Agam Gupta, Exеcutivе Dirеctor, Sharе India Fincap.
When can you avail HRA benefit?
HRA is exempted under section 10(13A) of Income Tax Act for salaried individuals. However, it is available only to those filing under the old tax regime. The new tax regime does not have most exemptions.
Full list of cities that may have 50% exemption
After the changes come into effect, taxpaying residents in the following cities will be able to claim a 50% HRA exemption under the old tax regime:
Key things to keep in mind while claiming HRA
HRA is a vital part of your salary, and claiming it appropriately can lead to tax savings depending on your rental situation and the amount of HRA you receive from your employer. These are some key things to keep in mind while claiming HRA:
- Ensure you have a signed rent agreement with your landlord.
- You can ask for the landlord’s permanent account number (PAN).
- Make sure you pay rent by bank transfer, not in cash.
- Always remember to obtain a rent receipt from your landlord when you deposit the rent.
- TDS should be deducted as per section 194IB, which comes into effect when the rent paid is more than ₹50,000 per month. The rate of TDS is 2% (5% till 20 September 2024).
- You can check your HRA calculation on the official Income Tax website here — https://incometaxindia.gov.in/Pages/tools/house-rent-allowance-calculator.aspx
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