Can PG Rent Be Claimed as HRA (House Rent Allowance) in 2025?
As you grow up and step-in into the working culture and you become a young working professional, the first and foremost expense that incur is for housing. If you take a rented space as your living option and receive a HRA, as a part of your salary. As we see most working professionals live in PG, you must wonder that does rent paid for a PG qualify for HRA exemption and especially in time period like the year 2025?
To determine whether PG rent can be claimed as HRA, one needs to consider certain criteria as per the Income Tax Act, 1961.
To Claim Hra, One Must Have the Ownership of the Property
Ownership of the property: A property must not be owned by the person requesting HRA in order for it to be deemed to be rented. In the case of a PG establishment, the landlord who is renting the rooms to the tenants typically owns it. The most important requirement is that the individual requesting HRA should not own the rented property. Usually, the landlord rents out the rooms of a PG house to different tenants, and the person asking for HRA (House Rent Allowance) is not the owner of the house. So, the condition is met.
Payment of Rent
In order to claim HRA, an individual is required to present a proof of payment of rent. While renting a PG, it is necessary to obtain a rent receipt from the landlord that specifies the amount paid and the time for which it was paid. The rent receipt should also have the landlord’s name, address, and PAN information, if any.
The next essential criterion for claiming HRA is to provide proof of payment of rent. In the case of PG accommodation, it is necessary to obtain a rent receipt from the landlord, which specifies the amount paid, duration of the rent paid, and the landlord’s name and address, including their PAN details, if applicable.
Location of the PG Accommodation
To claim HRA, the rented accommodation should be located in a city/town where the individual is employed. In case of a PG accommodation, the location of the PG should be within the city/town limits where the individual is working.
The location of the rented apartment is an additional important consideration to take into account. The rented residence must be situated inside the boundaries of the city or town where the person is employed in order to qualify for HRA. When a person needs PG housing, the PG’s location should be near the city or town where they are employed.
Employment Status
HRA claims are only acceptable from salaried people. People who are self-employed cannot make HRA claims. Last but not least, only those who are salaried can claim the HRA; those who are self-employed cannot. If a person fits the aforementioned requirements and is living in PG housing, they may be able to claim the rent paid for the PG as HRA. It’s crucial to remember that there are restrictions on how much HRA can be claimed. The minimum of the following is used to determine the HRA exemption:
Actual HRA Received from the Employer
- Rent paid minus 10% of the basic salary
- 50% of the basic salary for those living in metro cities (Mumbai, Kolkata, Chennai, Delhi, and their suburbs), or 40% of the basic salary for those living in non-metro cities
The HRA exemption is calculated based on the above three factors, and the minimum of the three is considered as the HRA exemption.
Always seek advice from a tax expert before claiming any exemptions. The tax expert can assist you in maximising your tax savings by assisting you in understanding the numerous exemptions that are available.
Conclusion
The Income Tax Act allows for the claiming of PG rent as HRA if all the necessary criteria are met. It is a valuable tax-saving opportunity for salaried individuals, and it is essential to understand the criteria and limitations associated with it. By following the rules and regulations, you can save a considerable amount of money on your taxes while fulfilling your housing needs.