House Rent is a Major Expense for Individual especially for those staying in Metro and Other Cities. However, the same House Rent Expense can help save some tax for salaried employees. In current salary packages, employees receive house rent allowance (HRA) to meet the cost of renting an house. A salaried employee staying in a rented house can claim a tax exemption towards the HRA received, subject to the limits specified in this regard under Section 10(13A) of the Income Tax Act.
HRA exemption Limit and Computation
The tax exemption is limited to the least of-
i) Actual HRA received
ii) 50% of the salary (if staying in Mumbai, Delhi, Kolkata, Chennai) else 40%
iii) Actual rent paid less 10% of salary.
Note: for section 10(13A), Salary means Basic salary plus dearness allowance (if provided by the terms of employment) plus commission based on fixed % of turnover
How it applies: For example, assume one earns a basic salary of Rs 20,000 per month and rents a flat in Mumbai for Rs 5,000 per month. His actual HRA is Rs 8,000. He is eligible for 50 percent of the basic pay for HRA exemption.
Least of:
- Actual HRA received – Rs 8,000
- 50 percent of basic salary – Rs 10,000
- Excess of rent paid over 10 percent of salary, i.e., Rs 5,000 less Rs 2,000 – Rs 3,000.
As such, Rs 3,000 per month is the least and will be the exemption allowable for HRA deduction. If he has no rent outflow, he will have to pay tax on full allowance of Rs 8,000. Also, tax exemption can be claimed only where HRA is part of the salary package. Depending on the amount paid as rent and HRA received, tax exemption can be claimed. If one receives HRA for the period during which he did not rent an accommodation, then no exemption can be claimed.
Documents required for Claiming HRA Exemption
You need to submit proof of rent paid through monthly rent receipts and rent agreement. Monthly rent receipts 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. If one is unable to do so, he/she could claim the exemption while filing the tax return and seek a refund. The rent receipts act as proof of payment of rent and should, therefore, be preserved.
Central Board of Direct Taxes (CBDT) has vide CIRCULAR NO. 4/2020, Dated: January 16, 2020 said if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee.
Also Read – Claiming HRA – What to do if landlord do not have PAN?
HRA and housing loan exemption
If a ready to use home for which home loan is taken is rented out to someone else, while you continue to reside in a rental accommodation then HRA along with the home loan benefits could be claimed. On the other hand, since you are recipient of rental income, then the tax would be applicable to the rental income received. Hence, in specific cases an individual can claim both HRA and home loan benefits together. Also, employers do have regulations in this regard, therefore, it is wise and advisable to cross check with the employer before you claim HRA and home loan benefits together.
Republished with amendments
Author Bio
Basic : Rs. 20000
HRA : Rs. 8000
Conveyance allowance : Rs. 800
Medical reimbursement : Rs. 1250
LTA : Rs. 2500
Other allowance : Rs. 7450
Total Gross : Rs. 40000
Deductions
Profession tax : Rs. 200
Income tax : Rs. 3000
sir
kindly let me know how to save Rs.3000 (income tax)
Basic : Rs. 20000
HRA : Rs. 8000
Conveyance allowance : Rs. 800
Medical reimbursement : Rs. 1250
LTA : Rs. 2500
Other allowance : Rs. 7450
Total Gross : Rs. 40000
Deductions
Profession tax : Rs. 200
Income tax : Rs. 3000
sir
kindly let me know how to save Rs.3000 (income tax)
if i am doing calculation of employee taxable income. he was employed in xyz company since 1april to 31st july .he joined abc firm from 1 august and at the end of march he was able to pay tax .he has not form 16 of previous job .he was getting hra and othr allowance deduction in previous job. but don’t know how much. i know only his basic salary .but i am not quite sure that should i give him hra and other allowance deduction for 3 month from April to 31 June at the time of calculation.
I am an employee of a private sector. My project is located 75 kms from Visakhapatnam. Because of the commuting problems, I am staying in the quarters provided tome by my employee. But since my daughters are studying in school / college in Visakhapatnam study because there are no facilities near the Project, I have rented a house in the Visakhapatnam city and my wife & 3 daughters stay there. Can I claim exemption of HRA
Dear all, I am Sahil Gupta pursuing CA & i am in Finals now. Here ia m giving a clear example for exemption of HRA:
Suppose Mr. A is working in a MNC & getting basic salary of Rs 20,000/- p/mnth. His CTC includes Rs 5000/- as HRA receipt. He lives in Delhi on a rented house where he is paying rent of Rs 6000/-. His HRA exemption will be as follow:
Conditions for HRA exemption :
1.)Rent paid per month – 10% of Basic salary
6000 – 10%*(20000)
4000/-
2.)50% of Basic salary (Delhi-metro city)
50%*(20000)
10000/-
3.)Actual HRA received from employer
5000/-
Now, exemption of HRA will be lower of all i.e, 4000/-
For any further clarification you can contact me anytime.
with warm Regards
Sahil Gupta
+91-9990557657
Email ID: sahil3094@gmail.com
sir please inform my consodlidated salary 20000/- PM and hra paid rs 8000/- kya mujhe 8000/- pm itax rebate mil sakti hai?
I am from defence and geting Rs 4500 Hra and paying Rs 5000 as a rent in hyderabad my basic salary including hra is 30000 (total) . My other deduction is afpp is 6000, insurance 2000.
My Son has following details:
Basic on salary= 437,953.00
House Rent Allowance on salary certificate = 218,976.00
House Rent Allowance 40%of basic for non metro = 177436.80
How much HRA will be considered by me Receiving the amount (HRA) for Income Tax i.e. Rs. 177436.80 or 218976.00 for my calculations
Thanks
Dear All I am working in HCL TECHNOLOIGES Limited and getting my HRA and living with my family and having own house so received HRA will be taxable or not.Thanks
pls explain the income tax basics and procedures.
also pls explain the current tax slab
Iam a university employee working as a assistant professor. My husband is working in public sector in bhilai steel plant, bhilai. My question is whether we both will get HRA or not.