CA Sandeep Kanoi

CA Sandeep KanoiCalculate your House Rent Allowance (HRA) exemption know HRA exemption Calculation Formula and download HRA Calculator in excel format for easy calculation of exempt  HRA Allowance out of Total HRA received by Salaried Assessee.

Employees generally receive a house rent allowance (HRA) from their employers. This is a part of the salary package, in accordance with the terms and conditions of employment. HRA is given to meet the cost of a rented house taken by the employee for his stay.The Income Tax Act allows for deduction in respect of the HRA paid to employees. The exemption on HRA is covered under Section 10(13A) of the Income Tax Act and Rule 2A of the Income Tax Rules. It is to be noted that the entire HRA is not deductible. HRA is an allowance and is subject to income ta

An employee can claim exemption on his HRA under the Income Tax Act if he stays in a rented house and is in receipt of HRA from his employer. In order to claim the deduction, an employee must actually pay rent for the house which he occupies.

ID-10039817The rented premises must not be owned by him. In case one stays in an own house, nothing is deductible and the entire amount of HRA received is subject to tax. As long as the rented house is not owned by the assessee, the exemption of HRA will be available up to the the minimum of the following three options:

  1. Actual house rent allowance received from your employer
  2. Actual house rent paid by you minus 10% of your basic salary
  3. 50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non-metro

This minimum of above is  allowed as income tax exemption on house rent allowance.

Salary here means basic salary which  includes dearness allowance if the terms of employment provide for it, and commission based on a fixed percentage of turnover achieved by the employee. The deduction will be available only for the period during which the rented house is occupied by the employee and not for any period after that.

Meaning of Salary for calculation the exemption of HRA

  • Salary means (Basic + D.A + Commission based on fixed percentage on turnover).
  • Salary is to be taken on due basis in respect of the period during which the period accommodation is occupied by the employee in the previous year.

Examples for calculation of exemption/deduction of HRA

X has received following amount during the previous year.

  1. Basic Salary – Rs. (5000*12) – Rs. 60,000/-
  2. Dearness Allowance (D.A) – Rs. (1000*12) – Rs. 12000/-
  3. House Rent Allowance (H.R.A.) – Rs. (2000*12) – Rs. 24000/-
  4. Actual Rent Paid – Rs.(2000*12) – Rs. 24000/-

Calculation

The minimum of the following amount shall be exempt

  • Actual HRA received (2000*12) – Rs. 24000/-
  • Rent Paid in excess of 10% of salary ( 24000-7200) – Rs. 16800
  • 40% of Salary – Rs. 28800/-

Therefore, Rs. 16800 shall be exempt and the balance Rs. 7200 shall be included in gross salary.

Frequently Asked Questions:-

How is HRA accounted for in the case of a salaried individual and a self-employed professional?

HRA (house rent allowance) is accounted for in the case of salaried people under Section 10 (13A) of Income Tax Act, 1961, in accordance with rule 2A of Income Tax Rules. On the other hand, self-employed professionals cannot be considered for HRA exemption under this act, as they do not earn a salary. However, they can claim benefits on the house rent expenses incurred under section 80GG, which resembles section to 10(13A) but is subject to certain conditions.

What are the dependent factors in calculating HRA for the salaried individual?

When you are calculating HRA for tax exemption, you take into consideration four aspects which includes salary, HRA received, the actual rent paid and where you reside, i.e., if it is a metro or non-metro. If these aspects remain constant through the year, then tax exemption is calculated as a whole annually, if this is subject to change, as in a rent hike, pay hike or shift in residence etc., then it is calculated on a monthly basis. It is usually rare for all the values to remain constant in a financial year.

The place of residence is significant in HRA calculation as for a metro the tax exemption for HRA is 50% of the basic salary while for non-metros it is 40% of the basic salary. This holds true especially when you work at a metro and reside at a non-metro. In this case, your city of residence only will be considered for calculating your HRA.

Can I pay rent to my parents or spouse to avail HRA benefits?

You can pay rent to your parents, however, they need to pay tax on the same or account the same in calculating their taxable income.

On the other hand, you cannot pay rent to your spouse. In view of the relationship when you take up residence together, you are expected to do so and hence such a transaction does not bear merit under tax laws. Sham transactions can only spell trouble under scrutiny, so steer clear of these.

Do I need to submit any proof for my HRA claim?

You need to submit proof of rent paid through rent receipts, for which only two need to be submitted, one for the beginning of the year and one towards the end of the financial year. It should have a one rupee revenue stamp affixed with the signature of the person who has received the rent, along with other details such as the rented residence address, rent paid, name of the person who rents it etc.

Can I simultaneously avail tax benefits on my home loan and HRA?

The tax benefits for home loan and HRA are two separate entities and have no direct bearing on each other. As long as you are paying rent for an accommodation, you can claim tax benefits on the HRA component of your salary, while also availing tax benefits on your home loan. This could be the case if your own home is rented out or you work from another city etc.

Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net

(Republished with amendments )

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  • Ashish Saxena

    I STAY IN COMPANY ACCOMMODATION AND COMPANY DEDUCT HOUSE RENT RECOVER FROM MY SALARY. CAN I CLAIM UNDER SECTION 80 GG

  • Dimpy Sharma

    By your logic.. what ever money that you spend, should be non-taxable.. That is not true. Relocation is taxable if it is getting reimbursed.

    • Uttam Singh

      He means since the money he received as reimbursement is the same Rs. 70000 he paid from his pocket that was already taxed.

  • Shrey Shah

    I am a fixed salaried person. In my salary sleep only final figure of salary is mentioned. How can I claim House Rent. I am leaving in rented house.. Kindly guide me.

  • Sheikh Nurani

    of course , you will get HRA exemption but surely less than what is shown on your salary slip. The calculation is above.

  • Ankur Trisal

    do we need to submit(mandatory) the copy i.e xerox of PAN of my owner or PAN card number is enough.

  • Ankur Trisal

    Is it necessary to submit copy of PAN card of the owner or PAN number is enough?

  • ashutosh

    Date of admissibility of HRA in case of late application

  • anupam

    Hi,

    Please see the below details and help me out.

    Home loan taken on August 2015, In December-2015 I got the possesion of my new house.

    Earlier I was living on rent, now moved to my new house in Jan 2016

    Can I claim tax benefit on: 1. HRA for period April-2015 to November-2015 (8 Months) 2. Sum of Principal Amount from the EMI which I will pay from December-2015 to March-2016 (4 Months)

    3. Sum of Interest Amount from the EMI which I will pay from April-2015 to March-2016 (12 months),

  • gajra nanda associates

    hello,
    Please help us on How to Save the capital gain Tax

    I purchase flat on 24-03-2003 purchase cost of flat is Rs. 6.37.150
    I sold that flat in feb 2016 sale cost is 45,00,000

    Indexation cost in 2002-03 447 and in 14-15 1081
    637150*1081/447 = 1540848
    So Long term capital gain is Rs. 29,59.152

    what should be done to save capital gain tax of Rs. 29,59,152

  • patrick fernandes

    is the Rent paid by the assesse for staying of his dependent can be included for HRA exemption

  • DILIP KUMAR

    I too has the same doubt..
    can any one please help me out..

  • paresh

    my Room Rent is 1800/Month. now the Account Dept. asking for Pan card Copy of land load. and land load Don’t this. Does pan card Copy is Mandatory? Kindly Suggest.

    • CA Suresh

      If rent is above 1 lac then only PAN card is required.

      • jibby

        My account dept. says, it is mandatory to pay rent by cheque and provide the copies of same also the rent receipt and PAN copies to get exemption, I pay 6000/month. Is it mentioned on any of govt. websites or on incometaxindiaefiling.gov.in regarding the same? And I can take a print and upgrade my accounts dept.

    • SAIPRASAD P M

      not mandatory unless rent is above 8333 per month

  • Kamlesh

    Hi
    I do not own house but live with ma parents..we have taken loan for home on the name of mother. I do contribute in home loan repayment . Can I get any deduction under income tax act.
    Please suggest any other alternatives if available.
    Thanka
    Kamlesh

  • Ravi Panchal

    is there an upper cap (maximum tax free HRA one can avail?)

  • Kuruvanal Mathew Mathew

    HRA Issue: There must be quite a lot of people who would come under the category that I am going to discuss. ie. those who stay in their own house and do not pay rent but receive the HRA from the company where he / she works. In this case they are not eligible for any deduction – right?
    Now my question is what about the society charges they pay. what about the municipal corporation tax. Why these should not be treated under or as rent or some sort of rebate should be provided. do you agree?

  • SAIPRASAD P M

    I don’t think relocation is covered in the non taxable category Like LTA and medical. Since the company paid you extra money they would tax you accordingly.

  • Kaushik

    My friend is a central govt. employee but his wife is state govt. employee, then what would be the house rent rule for their?

  • abhishek

    What wiil be the basic pay for a Pilot ?
    Will it include only basic pay
    Or will it include other allowances?

  • Prakash Rana

    (HRA) I have job in Himacha Pradesh and paying rent 96000 per year. My family staying at Gujrata and i am paying 120000 rent per year. Can i claim both rent as HRA?

  • Balachandran Thekkalakkal

    I have stayed in Govt quarter till dec 2015,and january 2016 onwards i am staying outside by rented house.So whether i can get tax exemption for three month for last financial year til march 2016? and how i can claim for that? becoz there is no option in online eflling tax return? pls tell me?

  • n.d

    I have stayed in Govt quarter till june 2015,and feb
    2016 onwards i am staying outside by rented house.So whether i can get tax exemption for three month for last financial year til march 2016? and how i can claim for that? becoz there is no option in online eflling tax return? pls tell me?

  • antony george

    My parents stay in rented house, and my sister pays the rent for this house. However, my sister stays few days with parents and few days of week is staying with her husband in their own flat in same city. Can my sister claim HRA tax benefits?

  • sravan dileep

    Is there a rule that if my rent claim is more than 15000 per month my landlord also should file ITR compulsorily ?