When it comes to HRA or House Rent Allowance that is applicable for Bank Employees then several things need to consider in order to get the benefits.
HRA Rules and Regulation for Bank Employees in India
House Rent allowance or more commonly known as HRA is a payment granted by the employer in order to cover expenses of rents paid living in a house not owned by the employee. Rent can be paid to:
a) An outsider or to the landlord who does not belong to the employee family.
b) One’s spouse and family members and
Better use the house rent allowance calculator to do the calculation of HRA based on basic salary. All the above conditions are met only when two bills are provided and the property rented does not belong to the employee. These two bills need to be submitted at the beginning and the end of the fiscal year. They also need to have a separate income tax account.
HRA Payable to Bank Employees updated in 2011
Amount HRA Payable
Rs 45 Lakh and Above HRA will be 10%
Rs 12 to 45 Lakh HRA will be 9%
5 to 12 Lakh HRA will be 7.5%
There are rules that allow to exempt the tax from HRA but in reality it doesn’t work.
HRA Rules for Bank Employees
HRA has an advantage on Tax exemption under Rule 2A, Income Tax Act. Tax can be claimed by both salaried people as well as business owners. Bank officials have certain rules and regulations laid by the governing body, to be followed. The five major classifications are as follows:
For the declaration mode of HRA allotment, payment is made according to the area where the Officer is placed (as discussed above). This is done through a bipartite agreement. This amount is stipulated either by the Indian Bankers Association along with the Union and the Government.
HRA tax exemption generally depends on the house accommodation setting i.e. urban or rural. Urban accommodation and rent allows 50% rebate whereas rural allows 40%. As stated earlier, house rent receipts need to be provided. A PAN copy of the landlord is required without which, tax benefits are not entertained.
In case of staying at own house, one can pay rent to ones parents provided they have a separate income tax file and that amount is taxable. Paying rent to one’s spouse is not advisable and might draw legal actions as according to Indian Marriage Act, husband and wife stays together after marriage.
Tax benefits on HRA can also be obtained for leased houses. In this case, since a lumpsum amount of money is taken by the landlord for a longer period of time, it becomes difficult to calculate the actual monthly rent. Thus it is advisable to calculate an estimated monthly rent and submit ones return. However there should be proof of lease from the landlord.
Quarter provided by Bank:
No HRA benefits are entertained in case the employee is given a place to live. Thus there is no additional tax benefit as there is no expense for rent.
HRA tax benefits can also be obtained while availing other loans and is not dependent on the loan amount or tenure.