Can Salaried Employees Claim HRA Tax Exemption on Maintenance Charges? Experts Weigh In

Many salaried employees living in housing societies pay maintenance charges in addition to rent. However, when claiming House Rent Allowance (HRA) tax exemption under the old tax regime, can maintenance fees also be included?

What Experts Say

According to Abhishek Soni, CEO of Tax2Win.in, the Income Tax Act does not specifically mention HRA exemption on maintenance charges. However, there are two interpretations:

1. If the maintenance charges are part of the rent and paid to the landlord, who then pays the society, they might be considered as rent.
2. If the tenant pays maintenance charges directly to the society, they will not be eligible for HRA exemption.

However, including maintenance fees in rent increases the rental income for the landlord, which may not be beneficial for them.

On the other hand, Sanjoli Maheshwari, Executive Director at Nangia Andersen India, states that HRA exemption applies only to rent payments for residential accommodation. Other expenses such as maintenance, electricity, and utility bills are not considered part of rent and are therefore not eligible for exemption.

Agreeing with this view, Aditi Goyal, Tax Partner at Trilegal, emphasizes that HRA exemption should be strictly limited to rent payments. Any additional charges paid directly by the tenant, like maintenance fees or electricity bills, do not qualify for tax benefits under HRA.

HRA Tax Exemption Rules

A salaried employee can claim HRA exemption only under the old tax regime as per Section 10(13A) of the Income Tax Act, 1961. The exemption amount is determined by the lowest of the following:

• Total HRA received from the employer
• 50% of basic salary (for metro cities) or 40% of basic salary (for non-metro cities)
• Actual rent paid minus 10% of salary

Here, “salary” includes only basic salary and dearness allowance—other salary components are not considered.

Example Calculation

Let’s consider a salaried employee earning:

• HRA received: ₹25,000 per month (₹3,00,000 annually)
• Rent paid: ₹30,000 per month
• Basic salary: ₹60,000 per month (₹7,20,000 annually)
• Location: Delhi (a metro city)

The exemption is calculated as the lowest of:

• Total HRA received: ₹3,00,000
• 50% of salary: ₹3,60,000
• Actual rent paid – 10% of salary: ₹2,88,000

Since ₹2,88,000 is the lowest, this amount will be tax-exempt, while the remaining ₹12,000 will be added to taxable income.

How to Claim HRA Exemption

Employees can claim HRA exemption in two ways:

1. Through their employer by submitting rent receipts, reducing TDS on salary.
2. While filing an income tax return (ITR), but this may require submitting rent-related proofs to the tax department if asked.

Documents Required for HRA Exemption

To claim HRA exemption, an employee should keep:

• Rent agreement
• Rent receipts
• PAN of the landlord (if annual rent exceeds ₹1 lakh)
• Proof of rent payment through banking channels

Conclusion

While HRA exemption helps reduce taxable income, maintenance charges cannot be claimed under this exemption unless they are explicitly included in the rent and paid via the landlord. Tenants paying maintenance fees directly to the society cannot claim tax benefits on those payments.