How to Show HRA not Accounted by the Employer in ITR_

How to Show HRA not Accounted by the Employer in ITR?

How to Show HRA not Accounted by the Employer in ITR: Generally, employees receive HRA, which stands for House Rent Allowance from their employers. Under the Income Tax Act, an employee has the choice to exempt HRA if he/she stays in a rented house and is in receipt of HRA. In this case, HRA paid by the employer to employee is taxable under Income from Salaries. However, it can help taxpayers in saving taxes as per Income Tax Act Section 13A.

When the HRA was not claimed, the taxable income would get added. It means that the employer would have deducted tax on that income. However, when House Rent Allowance is claimed in ITR filing then tax liability would get cut. Every financial year, the employer issues Form 16 to employees. This form involves information on the employee salary income along with TDS.

What is the Exemption on House Rent Allowance?

HRA is a stipend paid by employers to their employees for paying the housing lease. Any employee who pays rental charges for accommodation can claim HRA exemption. It is taken into consideration by the employer while calculating the cost-to-company or CTC of an employee. The HRA received by an employee is related to the amount of salary, and thus HRA rises with the increase in salary. It provides an advantage to an employee to claim a higher exemption on tax from the income tax authorities.

The amount of HRA exemption claimed by a salaried employee depends on several factors. The income tax department has specified some rules to follow while calculating this exemption of taxpayers. An employee can receive an exemption in the actual amount of HRA, fifty percent of the basic salary, and the actual rent paid minus ten percent of the total basic salary. House Rent Allowance is available for the period during which an employee stays in a rented house. So, if any employee rents the house for half a year, then they can claim exemption only for that period.

  • Self-employed professionals cannot be well-thought-out for HRA exemption because they are not earning a salary. However, such employees can take benefits on the house rent expenses involved under section 80GG.
  • Paying house rent to a spouse does not meet the requirements to claim exemption. However, an employee can claim on rent paid to others including in-laws, parents, brother, and sister.
  • If an employee stays in a rented residential place and is paying for it, then he/she can claim the exemption. However, if they stay in a house where they do not have to pay rent, then they cannot claim it.
  • One should show rent receipts to employers to allow HRA exemption. Based on these rent receipts, Tax Deducted at Source will be adjusted, which means employees do not have to pay HRA tax.
  • If rent exceeds Rs. 8333 per month or one lakh per year, then an employee must present details of the landlord to get benefit from an exemption. It involves necessary details like the PAN card of the landlord or more.
  • Both husband and wife living in the same rented residential accommodation can claim HRA exemption.
  • One can claim the House Rent Allowance as it has no bearing towards deduction of home loan interest. It means that employees can claim deduction on home loan interest and HRA as well.
  • An employee should actually pay the rent to claim HRA exemption. The benefit of tax exemption would not be available if rent is due but unpaid.

When does the Employer Offer Exemption on HRA?

According to Income Tax Act, the employer has to deduct tax from the salary of employees every month. Additionally, employers have to deposit the tax with the govt within seven days of the month. They have to file the TDS returns at the end of every quarter of a year. TDS rules are strict, and the employer can face severe consequences due to non-deposition or non-deduction of tax.

That is why; employers asked the statement of employers for tax deductions at the starting of the financial year. It helps them to compute according to the proposed investments and deduct tax accordingly. Employees must submit rent receipts or any other proof of payment to get exemption on HRA. In case if any of the employees fail to submit proofs then they can fill following exemptions while filing ITR:

  • Tax Exemption on HRA
  • Anyone who made payments for any deductions covered under section 80C or purchased NSC certificates can claim it while filing the return.
  • If any employee has a bill for a preventive health check-up, then he/she can claim it and get at most Rs. 5000 per month.

The total exemption claimed under Section 80GG is quite less than the potential exemption for employees receiving accounted HRA from employers. To claim an exemption under this section, employees should pay rent for accommodation and not receiving any HRA from the employer. Any taxpayer who owns house property or whose spouse owns it is not eligible to claim HRA exemption.

How Can Employees Show HRA Not Reported by Employer in ITR?

If for any reason, the employer did not consider the submitted rent receipts then employees can claim them while filing ITR. More TDS gets removed from the salary if the employer does not account for House Rent Allowance. It involves changes in HRA calculation, filing the salary details with HRA modifications, and checking if a refund is payable.

HRA Calculation: To calculate HRA at least one of the following should be available as a deduction:

  • HRA acquired by an employee
  • 50% of salary or 40% of basic salary. The basic salary is the sum of basic pay, commission based on fixed percentage on turnover, and Dearness Allowance. It ignores all other requisites or allowances.
  • Lease paid minus 10% of taxpayer’s basic salary
  • Number of months for which employees paid rent


How to Claim House Rent Allowance Not Accounted in ITR 1?

There is only one field to fill Income from Salary in ITR 1. So, taxpayers have to fill in Gross Salary on Form 16 for the Income Chargeable field. It involves all allowances, deductions, and more. To claim the HRA is not considered, an employee can subtract the HRA exemption amount calculated from the Gross Salary and enter it as Income from Salary. Moreover, there is no need to submit any investment or deduction proofs while filing ITR to the Income Tax Department.

How to Claim House Rent Allowance Exemption While Filing ITR?

Once the employee has considered the amount of HRA exemption to claim from income tax liability, they should claim it while filing income tax returns. The taxpayer should choose the form correctly while filing the income tax returns. After choosing the correct form, it is ITR-1 in most cases, the employee should enter the details ad required. The taxpayer has to enter the basic salary, which does not involve prerequisites and allowances. They should enter the number of unexempted allowances. The employee has to enter the non-exempt part of House Rent Allowance and add that to any other non-exempted allowances.

In the form, an employee has to mention the amount of House Rent Allowance, which they are claiming as an exemption. While filing the ITR-1 on the website of the Income Tax Department, the taxpayer should click on the Taxes Paid and Verification. Under this section, they will find an option of ‘Exempted Incomes’. It involves the House Rent Allowance option in which the employee has to enter the exempt portion of HRA.

Conclusion on How to Show HRA not Accounted by the Employer in ITR

The exemption on HRA offered by the Income Tax Department is a benefit to several salaried workers across the country. With the rising cost of living and increasing rent, this exemption is helpful to employees. However, the taxpayer should be mindful of the crucial conditions and must fulfill to become eligible for claiming the HRA benefit.

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