If your HRA has not been accounted in Form 16, you can still claim it by using the calculation of HRA shown earlier. As the HRA was not claimed, taxable income would be more hence employer would have deducted tax on it. Now when you claim it in ITR you tax liability would get reduced (and in cases where you have paid more tax than due you might get refund also) . This article explains How to show HRA not accounted by the employer in ITR1 and Schedule S of other ITS. along with HRA calculator
Table of Contents
Overview of HRA Allowance
Employees generally receive a house rent allowance (HRA) from their employers. An employee can claim exemption on his HRA under the Income Tax Act if he stays in a rented house and is in receipt of HRA from his employer. House Rent Allowance so paid by the employer to his employee is taxable under head Income from Salaries , but it can help you save taxes under Section 10(13A) of the Income Tax Act.
- You must be an employee. Self-employed professionals cannot be considered for HRA exemption under this act, as they do not earn a salary. However, they can claim benefits on the house rent expenses incurred under section 80GG, which resembles section to 10 (13A) but is subject to certain conditions.
- You must live in a rented residential accommodation, and pay rent for the same. If you stay in your own house, or in a house where you don’t pay rent, you cannot claim the exemption.
- If you pay house rent to your spouse, this does not qualify for exemption. But you can claim exemption on rent paid to others including parents, brother, sister in-laws etc. Our article Claim HRA while living with parents talks about it in detail.
- If you rent the house for only part of the year, the HRA exemption is allowed only for that period. HRA is available only for the period during which the rented house is occupied by the employee. So if you stayed in the house for 5 months and then moved to your own house, you can claim HRA only for the 5 months.
- You must actually pay the rent to claim the exemption. If rent is due but unpaid, the benefit of tax exemption on HRA is not available.
- If both husband /wife are working and living in same house on rent both can claim HRA subject to rent is shared/paid by both and individually,both can claim exemption up to share of rent paid actually paid by you.
- From fiscal year 2011-12 You need to give PAN details of landlord if rent exceeds Rs. 1.0 lakh year or Rs. Rs 8,333 per month. According to the CBDT circular, if your landlord does not have a PAN, he is required to write a declaration signed by him with his complete name and address. The landlord needs to identify himself by attaching valid identification proofs. In the declaration, the landlord has to specify that he does not hold a PAN card.
- Tax benefits for home loans and HRA are two separate aspects and have no direct bearing on each other. If your own home is rented out or you work from another city etc then As long as you are paying rent for an accommodation, you can claim tax benefits on the HRA component of your salary, while also availing tax benefits on your home loan. Please account for any rental income you receive from the property you own under income from House Property.
- You need to submit Proof of Payment or Rent Receipts to Employers. To allow you exemption on HRA, it is mandatory for the employer to collect proof of rent payment ie rent receipt. The employer will give you exemption on HRA based on these rent receipts. TDS will be adjusted so you don’t have to pay tax on HRA. Your tax liability will be calculated accordingly.
- Employer issues Form 16 to his employees for each of the financial year (April to March of next year). Form 16 provides details of the salary income of the employee along with the Tax deducted at Source (TDS). This has details of HRA deducted as shown in image below.
When does employer gives HRA and other exemptions
The income tax act puts the responsibility on the employer to deduct tax at the time of payment of salary to the employees every month. The employer has to deposit the tax with the government before the seventh day of the following month. The TDS rules are very strict and the employer faces stringent penal provisions for non-deduction or non-deposition of tax. Employers also have to file the TDS returns at the end of every quarter of a financial year.
So the employers asks employees for declaration of the their proposed investments for tax exemptions/deductions from employees in the beginning of the financial (April itself) . This helps them to calculate the taxable income according to the investments proposed and deduct the tax accordingly.
In month of Jan/Feb you need to submit Proof of Payment or Rent Receipts to Employers. To allow you exemption on HRA, it is mandatory for the employer to collect proof of rent payment ie rent receipt. The employer will give you exemption on HRA based on these rent receipts. TDS will be adjusted so you don’t have to pay tax on HRA. Your tax liability will be calculated accordingly. The HRA allowance is shown in Form 16 as shown in image above.
If you miss submitting proofs to employer While filing ITR you can fill following unclaimed exemptions
- House Rent Allowance exemption
- Claim deductions under section 80C: If you made deposits to PPF or purchased NSC certificates, or made payments for any deductions covered under section 80C, you can claim all of these at the time of return filing. Our article How to Claim Deductions Not Accounted by the Employer explains it in detail.
- Bills for preventive health check-ups:If you have not yet exhausted your deduction limit under section 80D and you have a bill for a preventive health check-up, you can claim this bill and get a maximum of Rs 5,000 as a deduction
Do note that you don’t have to submit any deduction or investment proofs to the Income Tax Department whiling filing ITR. Returns are submitted without attaching any files or physical documents. But you must keep them safely these proofs with you for 6 years, lest you receive an Income Tax Notice and the Assessing Officer calls for them.
You CANNOT claim LTA and Medical reimbursement if you haven’t submitted proof to your employer.
How to show HRA not accounted by the employer in ITR
But if for some reason you could not submit Rent Receipts or employer did not consider it , you can claim it while filing ITR. When HRA is not accounted by employer, more TDS is deducted from salary. It may happen that may be eligible for refund if net tax paid is more due from you. So claiming HRA not given by employer in ITR involves changing following steps:
- Calculation of HRA
- Filling the Salary Details in ITR with modifications for HRA
- Checking if Refund is due or not.
Note there is no change in Filling in the TDS details as per Form 16 and verified in Form 26AS or other schedules.
Calculation of HRA
As per income Tax act, for calculation House rent allowance least of the following is available as deduction.
- Actual HRA received
- 50% / 40%(metro / non-metro) of basic salary. Basic Salary for the purpose of HRA Calculation is Basic pay + Dearness Allowance + Commission based on fixed percentage on turnover and excludes all other allowances and perquisites.
- Rent paid minus 10% of basic salary.
- Number of months one has paid rent for.
Basic Salary and HRA received one can get from Salary Slip ,an example of which is shown in image below.
HRA Exemption Calculator
Please enter the details for calculating HRA. You can enter annual or monthly values of inputs such as Rent, HRA from Payslip.
|Details (Rent,HRA,Basic Salar) entered are||AnnualMonthly|
|Rent that you pay (Rs.):|
|Basic Salary (Rs.) :|
|Dearness Allowance(DA) (Rs.) :|
|HRA (Rs.) :|
|Do you live in metro city of Delhi,Mumbai,Kolkata,Chennai||Yes|
|Num of months claiming HRA for:|
HRA Exemption :
Claim HRA not accounted by the employer in ITR 1
ITR1 has only one field for filling Income From Salary. So for field Income chargeable under the Head Salary/Pension , on your Form 16, you need to fill in Gross Salary which takes care of all deductions,allowances etc . Fill information in point 6, as shown in image below. Our article Fill Excel ITR1 Form : Income, TDS, Advance Tax explains it in detail.
To claim the HRA not accounted by the employer you can deduct the amount of HRA exemption calculated from the Gross Salary and enter it as Income from Salary. So for Example your Gross Salary from Form 16 is 5,30,000 and you have HRA exemption. So instead of shoing 5,30,000 in ITR1 fill in 4,90,000.
How to fill Salary Details with HRA in Form 16 in ITR2A, ITR2, ITR3, ITR4S, ITR4
In ITRs other than ITR1 more infomation has to be filled in wrt to salary. Infact ITR2 has separate schedule S which has various fields. Overview of various sections under Schedule S is as follows. If some Allowance etc is not in the Form 16 means you have to take value 0.
- Non-monetary payments which are car facility, chauffeur salary paid directly,housing, rent-free accommodation,hotel bills, free supply of gas, electricity and water, benefit on account of interest-free loans, furniture provided to employees, soft furnishings and so on.
- Monetary payment perquisite means where the employee initially incurs the expense and the same is later reimbursed by the employer to him.
- LTA exemption comes under Section 10(5) of the Income Tax Act.
- Profit in lieu of Salary 17(3) includes
- Any compensation due or received by an employee in connection with the termination of the employment/ modification of the terms and conditions of his employment
- Payment from employer or former employer from provident fund or such other funds, excluding the amount exempted form tax under section 10
- Any sum received under Keyman Insurance policy including the sum allocated by way of bonus on such policy
- Amount due to or received, whether in lumpsome or otherwise by any assessee from any person before his joining any employment or after cessation of his employment
If Form 16 considers HRA then salary details to be filled in ITR2 are as follows. Click on image to enlarge.
How to fill Salary Details without HRA in Form 16 in ITR2A, ITR2, ITR3, ITR4S, ITR4
In the same example if HRA, of Rs 127877, would not have been claimed then once you calculate the HRA exemption subtract that from 1(a) ie Salary as per provision contained in sec 17(1) and fill the details. You need to subtract it from Gross Salary of 15,24,056.
- So you would show your Gross Salary in Schedule S for 1 as 1396179 (15,24,056 – 127877)
- Fill in remaining details from Form 16 as earlier
- Note now your total salary has become 15,05,379 instead of Rs 16,33,256.
Refund if one does show HRA not accounted by the employer in ITR
As we saw in the example above, by claiming HRA not accounted by employer while filing ITR, your Income from salary reduces by HRA amount. So your taxable income from salary become 15,05,379 instead of Rs 16,33,256. So if your employer has paid taxes based on 16,33,256 , more tax may have been paid on your behalf. You can then claim a refund of excess tax deducted by your employer in your Income Tax Return.
- How to Claim Deductions Not Accounted by the Employer
- If you don’t file the Income Tax Return on time
- Understanding Form 16 – Part 3
- E-verification of Income Tax Returns and Generating EVC through Aadhaar, Net Banking
- Articles to Understand Income Tax, How to Fill ITR,Income Tax Notice…
Note:The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.