Income Tax Glossary H: HRA, HUF, House Property Income
Several important taxation concepts begin with the letter G. This section of the income tax glossary explains commonly used terms such as Gross Total Income, Gift Tax, Global Income and GAAR in simple language for Indian taxpayers.
House Rent Allowance (HRA)
House Rent Allowance (HRA) is a salary component provided by employers to help employees cover the cost of rented accommodation.
Explanation
HRA forms part of an employee’s salary structure and may be partially exempt from income tax if the employee lives in rented accommodation and pays rent.
The amount of exemption is calculated based on factors such as:
Actual HRA received from the employer
Rent paid by the employee
Salary of the employee
Whether the employee lives in a metro or non-metro city
Employees usually need to provide rent receipts or a rental agreement to claim HRA exemption.
Hindu Undivided Family (HUF)
A Hindu Undivided Family is a separate taxable entity recognized under income tax law that allows members of a Hindu family to be assessed collectively.
Explanation
An HUF generally consists of family members related through lineage and includes:
the head of the family known as the Karta
spouse of the Karta
children
other lineal descendants
Income generated from family-owned assets or family business may be taxed under the HUF rather than the individual members.
An HUF receives a separate basic exemption limit under tax law.
House Property Income
House property income refers to income earned from renting out residential or commercial property.
Explanation
Income from property ownership is taxed under the head Income from House Property.
While calculating taxable income from house property, certain deductions may be allowed such as:
municipal taxes paid to local authorities
standard deduction on rental income
interest paid on housing loans
Even if a property is vacant, tax rules may apply depending on how many houses a taxpayer owns.
Housing Loan Interest Deduction
Housing loan interest deduction refers to the tax benefit available on the interest component of a home loan repayment.
Explanation
Taxpayers who have taken a loan for purchasing, constructing, or renovating a residential property may claim deductions on the interest paid.
This deduction reduces taxable income and lowers the total tax liability.
A loan interest certificate issued by the lender is typically required when claiming this deduction.
Home Loan Principal Deduction
Home loan principal deduction refers to the tax benefit available on repayment of the principal portion of a housing loan.
Explanation
When repaying a home loan, the installment generally consists of two components:
interest payment
principal repayment
The principal repayment portion may qualify for tax deductions under certain provisions of the income tax law.
This deduction encourages taxpayers to invest in residential property.
Holding Period
Holding period refers to the length of time a capital asset is held before being sold or transferred.
Explanation
The holding period determines whether the capital gain from selling an asset is classified as:
short-term capital gain
long-term capital gain
Different tax rates apply depending on the classification.
Assets such as shares, mutual funds, property, and gold may have different holding period requirements.
High Value Transactions
High value transactions refer to financial transactions above certain thresholds that are reported to tax authorities.
Explanation
Banks, financial institutions, and other reporting entities submit details of such transactions to help tax authorities monitor large financial activities.
Examples include:
large bank deposits
property purchases
high credit card payments
large investments in securities
These transactions may appear in the taxpayer’s financial information records.
Head of Income
Head of income refers to the classification used under income tax law to group different types of income.
Explanation
Income tax law divides income into five major heads:
income from salary
income from house property
profits and gains from business or profession
capital gains
income from other sources
Correct classification under these heads is necessary for calculating taxable income.
Hindu Succession (Tax Relevance)
Hindu succession refers to the legal process through which property and assets are inherited under Hindu law.
Explanation
Inheritance of property may have tax implications, particularly when assets such as real estate, investments, or family business ownership are transferred to legal heirs.
Although inherited assets are generally not taxed at the time of inheritance, tax may arise later when those assets are sold.
Housing Property Self-Occupied
Self-occupied house property refers to a residential property that is used by the owner for personal residence rather than being rented out.
Explanation
In the case of self-occupied property, the annual value of the property may be treated differently under income tax rules.
Taxpayers may still claim deductions such as housing loan interest on such properties.
