How to claim HRA or house rent allowance exemption

If you are living in rented accommodation in a metro city or in some other city and you do not own any house in such a city then you can claim house rent allowance exemption from your HRA. To claim exemption, your employer may ask you for;

  • rent receipt as a proof of payment of your rent, and
  • the lease agreement between you and your house owner

If you provide these details to your employer, your employer will calculate the house rent allowance based on the provisions of the income tax act and will provide you house rent exemption accordingly.

The rent receipt and lease agreement have to be submitted at the end of the financial year but your employer might ask you to provide a tax declaration at the beginning of the year to calculate your tax to be deducted every month. So while providing a declaration of such thing you need to make sure that you are paying the rent you declared and will be able to provide the required proof such as rent receipt and rent agreement at the end of the year.

What the employer will do with such receipt and lease agreement?

The employer will be keeping the rent receipts and lease agreement with them. If in case the income tax department asks for any details then the rent receipt and lease agreement will be produced before them.

What you should do to claim the house rent allowance correctly?

To claim your house rent allowance correctly you need to do followings;

  • Declare correct house rent paid by you to the employer at the beginning of the financial year
  • Make a rent agreement with your house owner by specifying clearly the monthly rent you are about to pay and the starting date of the lease and when the lease agreement will terminate.
  • Collect your Rent receipt every month from your house owner and keep that with you.
  • Pay rent through your bank account to the landlord’s bank account.
  • At the end of the financial year, when your employer asks you for rent receipt and agreement copy provide such things to them. The employer will be taking the rent receipt in the original and a photocopy of your lease agreement.
  • Keep the original lease agreement with you so that it can be produced in case it’s asked for.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.