Calculate 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 thse 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 tax.
An employee can claim exemption on his House Rent Allowance (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.
The 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 (HRA) 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.
Page Contents
- Meaning of Salary for calculation the exemption of HRA
- Examples for calculation of exemption/deduction of HRA
- Frequently Asked Questions on House Rent Allowance (HRA):-
- 1. How is HRA accounted for in the case of a salaried individual and a self-employed professional?
- 2. What are the dependent factors in calculating HRA for the salaried individual?
- 3. Can I pay rent to my parents or spouse to avail HRA benefits?
- 4. Do I need to submit any proof for my HRA claim?
- 5. Can I simultaneously avail tax benefits on my home loan and HRA?
- EXTRACT OF RULE 2A OF INCOME TAX RULES I.E. HRA EXEMPTION RULES
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 on House Rent Allowance (HRA):-
1. 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 (HRA Exemption 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.
2. 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.
3. 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.
4. 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.
5. 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.
EXTRACT OF RULE 2A OF INCOME TAX RULES I.E. HRA EXEMPTION RULES
[Limits for the purposes of section 10(13A) .
2A. The amount which is not to be included in the total income of an assessee in respect of the special allowance referred to in clause (13A) of section 10 shall be—
(a) the actual amount of such allowance received by the assessee in respect of the relevant period; or
(b) the amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessee in respect of the relevant period; or
(c) an amount equal to—
(i) where such accommodation is situate at Bombay, Calcutta, Delhi or Madras, one-half of the amount of salary due to the assessee in respect of the relevant period; and
(ii) where such accommodation is situate at any other place, two-fifth of the amount of salary due to the assessee in respect of the relevant period,]
whichever is the least.
Explanation : In this rule—
(i) “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule;
(ii) “relevant period” means the period during which the said accommodation was occupied by the assessee during the previous year.]
Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net
(Republished with amendments)
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Please Help!!!
If a person joins a company in July 2023 and following are the details:
1) Rent paid in DELHI from april to june – Rs.25000 per month (Person was unemployed during April to June)
2) Rent Paid in DELHI from July to March – Rs. 25000 per month ( Person was employed during July to March)
3) Basic Salary- Rs. 1,60,000 per month (from July to March)
4) HRA amount – Rs. 80000 per month ( from July to March)
Ques: Please calculate HRA Deduction and please tell should i consider the rent paid by person from April to June when he was unemployed for HRA Deduction calculation?
HRA=720000
exempt=81000
taxable=639000
Mr. A.k verma was working as manager at 25000 p.m. with M/s Hindustan photo, Jammu. He was receiving 4800 p.m. as D.A. and 6000 p.m. as H.R.A. He stays in his own house. He received 14000 as travelling allowance and he could spend only 12500. His salary accrues on 1st day of every month. He retired from service with effect from jan.31, 2021 and received the following amounts.
1. Retirement gratuity 462400. He retired rendering 34 years service and his salary during 2020-21 was 25000 p.m. [Not covered under gratuity act,1972]
2. His pension was fixed 12000p.m. he gets 3/4th of his pension commuted for a lump sum of 510000.
3. He received 224000 as refund from recognized provident fund. Half of it consists of his own contribution plus interest thereon.
4. Leave encashment of 125000 being 5 months’ salary received on 31-1-2021. He was allowed one month leave for each year of service.
Compute his salary income for the previous year ending on March 31, 2021.
Sir,
I am retired Accounts Officer from BSNL from 31-01-2021. After retirement I stayed in departmental Quarters from April 2021 to December 2021 and paid Quarters rent nearly Rs. 212000/- for the 9 months. I have bank statements paid to BSNL department in Hyderabad.
In this regard I want to know the claim for HRA exemption regarding submission of bank statements while E filing returns of Income Tax for the F/Y 2020-21. kindly clarify which documents i have to upload for claiming HRA exemption .
– A. LAKSHMINARAYANA , ACCOUNTS OFFICER (RETD) BSNL HYDERABAD –
Sir,
Kindly answer this query for me and the readers.
Person Kumar is a Central Government employee. His basic salary per month is Rs.77800/- per month. He receives NO HRA as he is in Central Government Quarters. But in his Form 16 A, under form 12BA the entire HRA received is added as perquisites. That amount works out to Rs.2,24,000/- per annum. Thus, he did not receive any HRA, but as he lived in Central Government Quarters the HRA foregone became perquisite. Is there any exemption for him as available to any other citizen? Kindly inform as this issue does not appear to be discussed here. It is an important point as due to reintroduction of standard deduction and new tax regime, we all will request for your kind clarification. Thanks.
I am HP state govt. employee.
My basic pay–18320
DA——35680
HRA received–600/month
But rent paidby me–5000/month
What would be my HRA exemption under the income tax rules.
I received HRA Rs. 600 per month but I paid Rs. 5000 thousands on rent .In this case what is the amount for hra rebate
If a central government employee transferred in mid of the month from ‘X’ class city to ‘Y’ class city, at what rate his monthly HRA will be calculated for this month?
Suppose an employee is staying in a quarter and receiving HRA Rs.5000 and also same HRA amount is deducted from Gross Salary. What will be the HRA exemption for the employee.
I’m a central government employee, I’m living in ordnance factory board guest house on paid basis approximately 900 rupee per month. My Basic pay is 27900. I’m eligible for HRA or not?
Hi Sir, I’ve stayed in rented only for 2 month in the last financial year and later moved to my own house. How to calculate HRA for those 2 months. Below are the details for those 2 months
Monthly rent 7000
Base salary per month 17360
HRA per month 8680
Should da arrear shall be included in calculations of hra
I am staying in rented house of rent 15000/month. My institution has been paying eligible rent of 11000/-for my rented home and extra 4000 payed by me. They are not paying hra for me. can I claim HRA in tax exemption
I have recieved arrears of salary (basic, da, hra) of previous years in fy 2018-19. Whether this is to be included/excluded for calculating hra exemption?