All about House Rent Allowance (HRA)

Date: 8-January,2022Last Updated: 26-September,2022
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Wondering about house rent allowance?

Yes, most of us are still ignorant of many of the major tax elements, especially HRA or House Rent Allowance.

Did you know that HRA is exempted from Income Tax?

So here we are to help; let us give you a simple overview of HRA in India.

What is House Rent Allowance?

House Rent Allowance, or HRA as the name suggests, is an allowance provided by the employer for his/her accommodation in a rented home.

This allowance, as mentioned earlier, can be deducted from Income Tax under Section 80GG as long as you do not live in your own home. The major benefit is, you can claim this deduction from your tax, even if your employer does not provide the allowance to you.

What are the different Heads that HRA can be deducted from?

House Rent Allowance is generally classified into the following categories:

  • Basic House Rent Allowance
  • Conveyance Allowance
  • City Compensatory Allowance

How is HRA or House Rent Allowance Determined?

The major factors upon which HRA is based upon are the type of city you dwell in and the salary you receive.

If you happen to live in a Metropolitan City, then HRA will be approximately 50 percent of your basic salary, and if it's any other city, it shall be 40 percent.

House Rent Allocation: FAQ

What are the major documents required for HRA tax exemption?

Apart from the basic employment documents, rent receipt, and also license agreement, water bill, electricity bill to support your claim of living in a rented home.

Can I claim HRA if I own my own house?

Yes, but only if you are living in a rented house. In case you have purchased a property and moved into it for residential purposes, then it will not be considered as a rented home, and you cannot claim HRA from your own property under any circumstances.

What is Conveyance Allowance?

Conveyance allowance means either actual expenditure or Rs 1600 per month, whichever is more. This allowance can be claimed for travel between home and office by car/ two-wheeler/ public transport. It includes toll charges, parking fees, etc.

Can I claim HRA from my own home when I have purchased it?

Absolutely not. If you are claiming a House Rent Allowance from your home in case of a rented house and if you start living in your own property, then there is no way that you can claim this allowance for your own home. This is because the benefit of the tax rebate under Section 80GG will be applicable only if you stay in a rented house and not in your own home.

What is City Compensatory Allowance?

Also known as the Location Allowance, this is compensation for people working in difficult areas with higher house rent.

What do I need to file my HRA returns?

You can claim a deduction under Income Tax Section 80GG for House Rent Allowance. However, you need to fulfill certain criteria set by the government to be eligible for this deduction. These include:

You need to stay in a rented house or in a house on rent that is let out and not your own property.

  • The payment should be made from employer to employee, directly or indirectly.

  • Your employer has been paying HRA from the salary bill presented to you every month. In the case of HRA exemption, the employer is required to maintain records of payment and provide a certificate for this deduction.

So we hope that you got a basic idea about House Rent Allowance. Do share your thoughts in the comments.

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