WHERE IS HRA EXEMPTION IN ITR 2?
Are you a salaried individual residing in a rented accommodation? If so, you're likely eligible for House Rent Allowance (HRA) exemption under Section 10 (13A) of the Income Tax Act, 1961. This exemption allows you to deduct a certain portion of your rent paid from your taxable income, thereby reducing your tax liability.
HRA Exemption Overview
The HRA exemption is available to individuals who receive HRA from their employers as part of their salary package. The exemption is calculated based on various factors, including your salary, the rent you pay, and the location of your rented accommodation. The quantum of HRA exemption is determined using this formula:
- Least of the following:
- Actual HRA received from your employer.
- 50% of your basic salary (60% in case of metro cities).
- Actual rent paid minus 10% of your basic salary.
Filing ITR 2
If you're eligible for HRA exemption, you'll need to file your Income Tax Return (ITR) using ITR-2 form. ITR-2 is meant for individuals and Hindu Undivided Families (HUFs) who have income from five heads:
- Salaries
- House Property
- Capital Gains
- Business or Profession
- Other Sources
Locating HRA Exemption in ITR 2
While filing your ITR-2, you can claim your HRA exemption under the following steps:
- Go to the "Income from House Property" section.
- Under the "Gross Total Income" section, you'll find a field labeled "Rent Received / HRA Received."
Enter the total amount of rent received or HRA received during the financial year.
- Find the "Deductions from Gross Total Income" section.
- Under the "House Property" sub-section, you'll see a field labeled "HRA Exemption."
Enter the HRA exemption amount you're claiming.
- The HRA exemption amount will be automatically deducted from your taxable income.
Supporting Documents
When claiming HRA exemption, it's essential to keep the following supporting documents ready for verification by the Income Tax Department:
- Rent agreement
- Rent receipts
- HRA certificate from your employer
Conclusion
Claiming HRA exemption can significantly reduce your tax liability. By following the steps outlined above, you can easily claim your HRA exemption while filing your ITR-2. Remember to keep all the necessary supporting documents handy to avoid any hassle during the verification process.
FAQs
- How can I determine if I'm eligible for HRA exemption?
You're eligible for HRA exemption if you receive HRA from your employer, pay rent for your accommodation, and meet the prescribed conditions as per the Income Tax Act.
- What documents do I need to claim HRA exemption?
You'll need your rent agreement, rent receipts, and HRA certificate from your employer.
- How is the HRA exemption calculated?
The HRA exemption is the lowest of the following:
- Actual HRA received from your employer.
- 50% of your basic salary (60% in case of metro cities)
- Actual rent paid minus 10% of your basic salary.
- Can I claim HRA exemption if I live with my parents?
Yes, you can claim HRA exemption even if you live with your parents, provided you pay rent to them and meet the other eligibility conditions.
- What happens if I don't claim HRA exemption while filing my ITR?
If you don't claim HRA exemption while filing your ITR, you'll end up paying higher taxes.