Can a Taxpayer Claim HRA Tax Exemption for Society Maintenance Charges too?

Maintenance charges are the fees that salaried employees pay along with their rent to the landlord. It is a fixed amount that goes to the society and is mentioned in the rent agreement. So, is it possible for salaried employees selecting the old tax regime to claim HRA tax exemption for society maintenance charges?

The Income Tax Act does not specifically mention the HRA exemption on maintenance fees. However, experts have different views on this. As per an expert, there can be two opinions:

• The first opinion is that maintenance charges can be treated as a part of the rent and should be allowed for HRA Deduction
• The second opinion is that the tax authorities may not allow the maintenance charges for HRA exemption as the law does not specify them as a part of the rent.

However, the expert believes that maintenance charges should be considered as a part of the rent in the rent agreement, as the tenant pays them to the landlord, who then passes them to the society. This would problem for landlord as it will increase the rental Income, who would not benefit from the maintenance charges as they only transfer the payment on to the society. On the other hand, if the tenant pays the maintenance charges directly to the society, then such maintenance charges are not allowed for HRA tax exemption.

As per an expert, Section 10(13A) of the Income-tax Act, 1961, states that HRA exemption is only allowed for the rent payment of accommodation occupied by a salaried employee. Other expenses, such as maintenance charges, utility payments, electricity charges, etc., included in the rent as per the rent agreement would not be considered as a part of ‘rent payment’, and therefore, it would not be eligible for claiming tax exemption.

Understanding HRA Tax Exemption Rules

Salaried employees can claim tax exemption on HRA if they are living in a rented home and they have received HRA as part of their salary. It can be claimed under Section 10(13) of the Income Tax Act. It is important to note that the HRA exemption is only available under the old tax regime.

Taxpayers can claim Exemption on HRA based on the following three factors. The actual amount of exemption will be the lowest of the three:

• Total amount of HRA received by an employee from the employer
• 50% of salary if living in metro cities or 40% of salary if living in non-metro cities,
• Actual rent paid minus 10% of salary.

The salary here only includes the basic salary and dearness allowance.

How to claim tax exemption on HRA?

To claim HRA tax exemption, one can either submit HRA proofs to their employer or claim it while filing an income tax return. If the proofs are submitted to the employer, a lower tax will be deducted from the salary income, and the exemption will be calculated by the employer, which will be included in Form 16.

However, if the taxpayer claims it in the ITR, then the taxpayer must calculate the tax exemption manually. Additionally, as the exemption is not claimed by an employer, the income tax department can issue a notice asking taxpayers to submit the proof of HRA claimed.

Taxpayers must keep documents to support their claim. This includes rent receipts, rent agreements and PAN of the landlord (if the annual rent is more than Rs 1 lakh). The rent should be paid through banking channels, as it can be used to prove that the rent has been paid to the landlord.