Mostly, HRA (House Rent Allowance) is the part of salary package. The HRA benefits can be received from their employer, the person who receives the benefits of HRA is eligible to declare the HRA as the tax savings. Here the information is mentioned about HRA India, HRA TAX Exemption Calculation, Rules and Calculator.
HRA TAX Exemption Rules: Most of people already know about HRA Exemption, but how to calculate HRA is also most important. The important rules are,
- If you are staying in the rental house then only it is applicable.
- If you are reside in your own house then you will not be eligible to claim the tax benefits for HRA paid by your employer.
The full detail about the HRA exemption is described under Section 10 (13A) of the Income Tax act 1961. The three conditions to eligible for HRA exemption are,
- Actual House Rent Allowance received by the employee
- Excess of rent paid for the accommodation occupied by him over 10 % of the salary.
- 50% of salary where the residential house is situated at Mumbai, Calcutta, Delhi or Chennai and 40% of the salary where the house is situated at any other place
Note: “The minimum of the above three amounts shall be exempt from tax and the balance shall be taxable and thus included in gross salary of employee.”
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.
Calculation factors: The exemption in respect of HRA is based upon the following factors:
- HRA received
- Place of Residence,
- Rent Paid,
It is advisable that HRA exemption is not be calculated on yearly basis, if there was any change in above factors during previous year.
Examples for calculation of exemption/deduction of HRA:
A person has received following amount during the previous year.
- Basic Salary – Rs. (5000*12) – Rs. 60,000/-
- Dearness Allowance (D.A) – Rs. (1000*12) – Rs. 12000/-
- House Rent Allowance (H.R.A.) – Rs. (2000*12) – Rs. 24000/-
- 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. For more information.
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