Know more about your House Rent Allowance (HRA)

Know more about your House Rent Allowance (HRA)

Allowances are a fixed sum paid by an employer to employee. Most of the time, these allowances are taxable unless there are any exemptions made by law. One such allowance is the House Rent Allowance and regulated by Section-10 (13A) of Income Tax Act.

House Rent Allowance:

As a part of the salary, employees usually get a house rent allowance from their employers. The salaried employees who pay rent for their house can claim HRA to lessen taxes. There will be a partial or full exemption from taxes. This does not apply to self-employed or salaried employees who live in their own houses. If the rent paid is more than 1 lakh then details of the landlord also should be produced.

HRA basically depends upon salary (if there are any dearness allowances, commissions should be added to salary).

HRA granted will the minimum of the three mentioned:

  • An Amount received as original HRA by the employer.
  • Rent paid less 10% of actual salary.
  • 50% of actual salary (in a metro city) and 40% in a non-metro city.

Calculation of  House Rent Allowance:

To clear understanding, let’s discuss an example.

Sumit stays in Delhi and his monthly rent is 10000. His salary details are given below:

Actual Salary 40000
HRA provided by the employer 15000
Travelling Conveyances 3000
Other allowance 1000
LTA 3000
Total Earnings 61000

 

Now, let’s calculate HRA  exemptions from Income Tax:

  • Actual Salary: 40000 (there are no add-ons like dearness allowance or any commissions)
  • 10% of Annual Basic Salary: 48000
  • Annual Rent Paid: 120000

Now, Actual  annual rent paid ­(-) 10% of annual basic salary

          120000 – 48000 = 72000

50% of actual salary (metro) = 240000

The amount received by as HRA – 15000 X 12 = 180000

In this case, HRA amount will be exempted from the Income Tax is 72000 as this is the lowest of all the three.

What if there is no HRA included in your salary?

If there is no HRA, you can claim tax exemption under  SECTION 80GG

Clauses:

  • Self Employed or Salaried
  • Not received HRA during the year you claim 80GG
  • No one in your family owning any residential accommodation at the current place you reside

How to claim: (The lowest of these will be considered)

  • 2000 per month
  • A quarter of total income
  • Basic rent less 10% of income.

 

For any help on ITR Filing feel free to consult the tax experts at Taxraahi. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business Return, and Bulk Return.now !!

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By | 2018-08-08T07:51:42+00:00 June 8th, 2016|Categories: Income from Salary|Tags: , |0 Comments

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