Income Tax benefit from HRA
One of the important parts of the compensation package given to an employee by an employer is the house rent allowance. The basic aim of this HRA is to make the employee to meet their cost of rent for their home. In addition employees can also enjoy certain Income Tax Benefit from HRA. The following deals with some of the implications and tips for making some plans regarding income tax on HRA. Any individual who is employed in a company, they need update their information on tax planning and declaration. In addition, employees are also offered with tax savings on HRA that is paid by their employer.
Income Tax Benefits from HRA is eligible for all the employees who receive their HRA benefits from their employer. But the important thing to be noted is that, this tax benefit is available only for those who stay in the house for rent. Those employees staying at their own house cannot apply for this Income Tax Benefits from HRA from their employer. In fact, the details on this tax benefits can be best understood from the Income Tax act of 1961. Also, there are about three conditions that have to be satisfied to meet with the eligibility criteria.
The following include the three conditions and they are i) the person must be staying in the rented house, ii) the rent of the house at which the employee currently stays must be larger than 10% of their salary and iii) the most important thing is that HRA must be an included component of your salary. There are certain conditions followed to calculate the HRA for claming the Income Tax Benefit from HRA. It includes, the HRA amount must be 40% of the total salary and the amount of rent paid should be subtracted from the 10% of the salary.