CA Aashish Ramchand

In this article I have discussed provisions regarding exemption from House Rent Allowance –

As per Section 10 (13A) and rule 2A exemption in respect of house rent allowance is based upon the following –

1)      An amount equal to 50 per cent of the salary, where the residential house is situated at Bombay, Kolkata, Delhi or Chennai, and an amount equal to 40 per cent of the salary where the residential house is situated at any other place.

2)      House rent allowance received by the employee in respect of the period during which rental accommodations is occupied by the employee during the previous year.

3)      The rent paid in excess of 10 per cent of the salary.

The least of the above three is exempt from tax. The following points should also be kept in view –

“Salary” for this purpose means basic salary and includes dearness allowance if the terms of employment so provide. It also includes commission based on fixed percentage of turnover achieved by an employee as per the terms of contract of employment. But it does not include any other allowance or perquisite.

The “salary” for this purpose shall be determined on “due” basis i.e. Basic salary, dearness allowance and commission are determined on “due” basis in respect of the period during which rental accommodation is occupied by the employee in the previous year. It therefore follows that salary of a period, other than the previous year, is not considered even though such amount is received during the previous year and is taxable on receipt basis. Likewise salary of the period during which rented accommodation is not occupied in the previous year, is left out of the aforesaid computations.

Exemption is denied where an employee lives in his own house, or in a house for which he does not pay any rent or pays rent which does not exceed 10 per cent of salary.

The amount of exemption in respect of house rent allowance received by an employee depends upon the following –

a)      “salary of the employee”

b)      House rent allowance received

c)       Rent paid

d)      The place where the house is taken on rent

When these four conditions are same throughout the previous year, the exemption should be calculated on an “annual” basis. When however, there is a change in respect of any of the aforesaid factors, then the exemption shall be worked out on “monthly” basis.

(Author is CA by profession & Co-Founder of  Make My Returns (www.makemyreturns.com) & can be reached at connect@makemyreturns.com)

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0 responses to “House Rent Allowance – Income Tax provisions”

  1. CA Imran Tamboli says:

    Yes, you can claim hra exemption while filing the return only condition in your case is house rent allowance should be component of your salary break-up.

  2. Pradeep says:

    My query is as follows:

    I am working at Bangalore
    (alone)and am staying at a rented place. My family is residing in a rented place at Delhi. I do not want to submit my Rent Receipts at Mumbai Instead i would like to submit my Rent Receipts for Delhi because these are of higher values and i would get the benefit of HRA. By submitting the Rent Receipt of my Mumbai stay, i would not get the benefit of tax saving since the amount is low.

    Could you please confirm whether i can submit my Rent Receipts of Delhi with the Rent Agreement to my Mumbai Employer?

    Your reply will save me from a very big tension.

    Thanks,
    Pradeep

  3. Pradeep says:

    My query is as follows:

    I am working at Mumbai (alone)and am staying at a rented place. My family is residing in a rented place at Delhi. I do not want to submit my Rent Receipts at Mumbai Instead i would like to submit my Rent Receipts for Delhi because these are of higher values and i would get the benefit of HRA. By submitting the Rent Receipt of my Mumbai stay, i would not get the benefit of tax saving since the amount is low.

    Could you please confirm whether i can submit my Rent Receipts of Delhi with the Rent Agreement to my Mumbai Employer?

    Your reply will save me from a very big tension.

    Thanks,
    Pradeep

  4. Baljeet says:

    My query is as follows:

    I am working at Mumbai (alone)and am staying at a rented place. My family is residing in a rented place at Delhi. I do not want to submit my Rent Receipts at Mumbai Instead i would like to submit my Rent Receipts for Delhi because these are of higher values and i would get the benefit of HRA. By submitting the Rent Receipt of my Mumbai stay, i would not get the benefit of tax saving since the amount is low.

    Could you please confirm whether i can submit my Rent Receipts of Delhi with the Rent Agreement to my Mumbai Employer?

    Your reply will save me from a very big tension.

    Thanks,

    Baljeet

  5. veena rawat says:

    What salary means for HRA rebate .
    Is TA & its DA include in 10% of salary for HRA rebate to subtract from actual rent paid.

  6. Manoj says:

    whether is it possible to claim HRA while filing the return,the same has not been considered by employer while issuing Form-16,the whole amount of hra received was included is Basic salary.

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