Project on

House Rent Allowances

[ SU B MI T TE D A S P A RT I A L R E QU I RE ME N T S F OR B.A. L.L.B. HON OU R S ]

Submitted by – Siddharth Dhabhai Submitted to – Ms. Pooja Saxena

Roll no – 070

Semester – 7 B

Date of submission – 14th October 2023

University Five Year Law College,

1
 Contents

DECLARATION .......................................................................................................................3
ACKNOWLEDGEMENT ........................................................................................................4
CERTIFICATE .........................................................................................................................5
ABSTRACT...............................................................................................................................6
Ch-1 Introduction .....................................................................................................................7
Ch-2 Rules Regarding House Rent Allowances .......................................................................8
Conditions Required for Claiming HRA: ......................................................................8
Method for Calculation of HRA: ...................................................................................8
HRA taxation Rule in India: ........................................................................................ 10
Documents Required for claiming HRA: .................................................................... 12
Conclusion ............................................................................................................................... 13
Bibliography and other Websources ...................................................................................... 14

2
 DECLARATION

I, Siddharth Dhabhai hereby declare that this project titled House Rent Allowances is based on
original research work carried out by me under the guidance and supervision of Ms. Pooja
Saxena.

The interpretation put forth are based on my reading and understanding of original text . The
books , articles etc used by me have been duly acknowledged at the respective places.

For the present project which I am submitting to the university , no degree or diploma has been
conferred to me before , either in this or any other university

Date – 14th October 2023

Name – Siddharth Dhabhai

3
 ACKNOWLEDGEMENT

In the accomplishment of this project successfully many people have best uponed me their
blessings and heart pledged support , this time I am utilizing to thank all the people concerned
with this project.

First of all I would like to thank our Director Dr. Akhil Kumar for giving me an opportunity. I
would also like to thank our supervisor Ms. Pooja Saxena whose valuable suggestions helped me
a lot .

Last but not the least I would like to thank my parents and friends who helped me in making of
the project

Siddharth Dhabhai

4
 CERTIFICATE

Ms. Pooja Saxena.

Faculty

University Five Year Law College

University of Rajasthan , Jaipur

This is to certify that Mr. Siddharth Dhabhai of semester 7 B of University Five Year Law
College ,University of Rajasthan , Jaipur has carried out the project entitled “House Rent
Allowances” under my supervision and guidance . It is an investigation report of a minor project.
The student has completed research work in my stipulated time and according to norms
prescribed for the purpose.

Supervisor

Ms. Pooja Saxena

5
 ABSTRACT

 House Rent Allowance (HRA) is a component of an individual's salary provided by the

Research Methodology

 This research is based on doctrinal pattern. It is based on already available and analysed
information. This research involves secondary data.

Research Question

 Conditions required for claiming HRA

6
 Ch-1 Introduction

Many times, people have to move to a different city in order to work. In such cases, they may
end up paying rent for accommodation. Hence, organizations often compensate employees for
this expenditure by paying them HRA.

House Rent Allowance (HRA) is a component of an individual's salary provided by the employer
to meet the cost of renting a home. It is a significant tax-saving component for salaried
individuals in India. Under the Income Tax Act, employees who live in rented accommodations
can claim HRA to reduce their taxable income. However, the amount that can be claimed as tax
exemption is subject to certain conditions and limitations. The calculation of HRA deduction
depends on multiple factors such as:

 Your salary

 HRA received

 Actual rent paid

 City of residence

One can claim a deduction for HRA under Section 10(13A) of the Income Tax Act but it can be
fully or partially taxable. The calculation of HRA deduction depends on multiple factors

In this project we will discuss in detail what all are the formalities required for claiming HRA,
who all are eligible for it and what all are the related rules for claiming tax benefit.

7
 Ch-2 Rules Regarding House Rent Allowances

 C ONDITIONS R EQ UIRED FOR C LAIMING HRA:

1. Salaried Individual: Only salaried individuals are eligible for HRA. Self-employed
individuals cannot claim this benefit.
2. Rent Payment: The individual must actually incur expenses towards payment of rent for the
property in which they reside.
3. Rented Accommodation: HRA can only be claimed if the taxpayer lives in a rented
accommodation. If you live in your own house or if you do not pay any rent, you cannot
claim HRA exemption.

 M ETHOD FOR C A LCULATION O F HRA:

HRA calculations are based on a number of factors, including your salary, the HRA you receive
from your employer, the actual rent you pay, and whether you live in a metro or a non-metro
city. However, when computing the HRA tax calculation, the amount of exemption will be the
lowest of:

 The HRA your employer pays you

 Actual rent paid for accommodation minus 10% of basic pay

 50% of basic salary plus dearness allowance if you live in a metro city (Mumbai, Delhi, Kolkata,
or Chennai) or 40% of basic salary plus dearness allowance if you live in a non-metro city
The house rent allowance calculation or HRA formula is to calculate the three aspects above and
claim the lowest as HRA deduction under Section 10(13A) of the ITA.

8
  Illustration

Mr. Shivank lives and works in Pune. He has a rented accommodation, paying Rs. 7,000 per
month. His monthly salary is Rs. 45,000, with the following break up:

Component Amount (INR/ Rs.)

Basic Pay 25,000

HRA 8,500

Allowances 8,500

PF 3,000

Total Salary 45,000

Using the HRA calculation formula, Mr. Shivank gets:

 An annual HRA of Rs. 1,02,000 from the employer (₹8,500 X 12 = ₹1,02,000)

 An annual rent of ₹84,000 that he actually pays. However, we need to apply the HRA percentage
formula, which is actual rent minus 10% of basic pay. This comes to ₹54,000 (₹7,000 x 12 –
₹30,000 = ₹54,000)

 Pune is a non-metro city. Therefore, 40% of basic salary would amount to ₹1,20,000 (40% x
₹3,00,000 = ₹1,20,000).

The maximum deduction that Mr. Ramanath can claim under section 80C of the ITA as HRA
deduction would be the lowest of the three amounts, ₹54,000. The remaining ₹48,000 of the
HRA allowance will be taxable as per his income tax slab.

9
 HRA TAXATION R U LE IN I NDIA :

1. Taxable Portion of HRA:

 HRA received is partially taxable. The amount of HRA that is exempt from tax is the
minimum of the following three calculations:
 Actual HRA received from the employer.
 Rent paid minus 10% of salary.
 50% of the salary (for metro cities) or 40% of the salary (for non-metro cities).

2. Calculation of Salary:

 For the purpose of HRA calculation, salary includes basic salary and dearness allowance
(if provided). It does not include other allowances and perquisites

3. Rent Payment Proof:

 To claim HRA exemption, you need to provide proof of rent payments, such as rent
receipts, along with the landlord's PAN (Permanent Account Number) if the annual rent
exceeds Rs. 1 lakh. 1

1
https://www.etmoney.com/learn/saving-schemes/house-rent-allowance/

10
4. Landlord's PAN Requirement:

 If the annual rent paid is more than Rs. 1 lakh, it is mandatory to provide the landlord's
PAN to the employer to claim the full HRA exemption. If the landlord does not have a
PAN, a declaration to this effect from the landlord along with the name and address
should be furnished by the employee.

5. Tax Deducted at Source (TDS):

 If your landlord does not provide PAN, TDS at the rate of 5% on the rent amount
exceeding Rs. 50,000 per month may be deducted by your employer.

6. Claiming HRA in Tax Returns:

 If you have received HRA during the financial year, you need to declare it while filing
your income tax return. The exempted portion of HRA does not need to be shown in the
income tax return.

7. Revised Form 12BB:

 As per the revised Form 12BB, you need to provide detailed breakup of your income,
including HRA and exemptions claimed, to your employer for TDS purposes.

11
 D OCUM ENTS R EQ UIRED FOR CLAIMING HRA:

 In order to claim HRA tax exemption, an individual will need to submit certain
documentation proofs. This includes rental receipts that show the rent used for HRA
deduction calculation or the rental agreement with the equivalent rent amount mentioned.

 Additionally, if the rent exceeds ₹1,00,000 per annum, then a copy of the landlord’s PAN
card or a signed declaration form from them is required. For rent paid to family members
or parents, the same proofs will be needed for HRA tax calculation. 2

2
https://cleartax.in/s/hra-house-rent-allowance

12
 Conclusion

Many times, people have to move to a different city in order to work. In such cases, they may
end up paying rent for accommodation. Hence, organizations often compensate employees for
this expenditure by paying them HRA

House Rent Allowance (HRA) in India is a component of an individual's salary provided by the
employer to cover rent expenses for living in a rented accommodation. The taxable portion of
HRA is determined based on salary, actual rent paid, and the city of residence. Individuals can
claim tax benefits on the exempted HRA amount, reducing their overall taxable income. To avail
full exemption, PAN details of the landlord must be provided, and if not, TDS may be
applicable.

It is a significant tax-saving component for salaried individuals in India. Under the Income Tax
Act, employees who live in rented accommodations can claim HRA to reduce their taxable
income. However, the amount that can be claimed as tax exemption is subject to certain
conditions and limitations.

13
 Bibliography and other Websources

 https://www.etmoney.com/learn/saving-schemes/house-rent-allowance/
 https://cleartax.in/s/hra-house-rent-allowance

14