To avail full benefit of tax exemptions, a well-defined salary structure is very crucial. House Rent Allowance (HRA), if included in the salary, can help individuals save tax. In this article we will explain how tax exemptions are calculated on HRA received and certain important points to be kept in mind while calculating these exemptions.
Companies provide House Rent Allowance to employees for rented accommodation. Income tax offers tax exemptions to those employees who live on rent. If claimed properly, House Rent Allowance can bring some tax relief to salaried individuals. The lower of the following is allowed as a deduction:
Some important points that must be noted while calculating these exemptions:
If rent paid is above Rs. 1 Lakh per annum, declaring PAN of the landlord is compulsory to avail tax exemptions.
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