Allowance - HRA:
(Section 10(13A) of
the Income Tax Act)
House Rent Allowance or HRA is a benefit given
employers to their
employees as a part of salary to meet the expenditure incurred
towards payment of rent for the residential house occupied by the
It is very important for salaried people to make themselves
fully aware of HRA provisions as HRA constitutes a good portion of ones
salary structure and can save a good amount of tax. Understanding the
tax effectiveness of HRA can help you plan your salary structure too.
Lets discuss the HRA provisions in detail and have a clear
understanding of exempt amount of HRA.
can avail the benefit of HRA
Only salaried individuals living in rented accomodation can avail the
HRA exemption. One more important thing to know here is that HRA
exemption is available only if HRA
is a part of salary. Thats why self employed peolple are not entiltled
benefits. For Self employed people Section 80GG
provides some relief in the form of deduction for rent paid.
Refer this link for details on section 80GG
Amount of HRA
Extent of HRA exemption depends on
four things -
- HRA given by employer,
- Annual salary,
- Rent paid and
- the city in which you live.
above four, exemption of HRA is calculated and least of the
allowed as exemption from Tax:
- Amount of House Rent Allowance (HRA) received
- Rent paid minus 10% of salary; and
Click here for HRA calculator in excel
of salary if living in Metro cities ie. Delhi, Mumbai, Chennai,
Kolkatta, Bangaluru & Hyderabad and 40 % of Salary if living
in any other city or Non metro cities.
for HRA Calculation:
Salary for the calulation of HRA means total of-
Example to understand
- Basic Salary,
Allowance (DA) and
Suppose Mr. A working with a company for basic
100000 p.m (DA ₹ 50000), lives in Delhi. He also gets HRA of ₹
40,000 p. m. from his company. Mr. A pays ₹ 45000 monthly rent for
his accomodation in Delhi. In this example HRA exemption will be least
of the following:
- HRA = 12*40000 = ₹ 480000
- Rent paid minus 10% salary including DA = Rs. 360000
- Rent Paid = 12*45000 = 540000 per annum
- 10% of salary = (12*150000)*.10 = 180000
Rent PAid -10% salary =
540000-180000 = Rs. 360000
- 50% of Salary as living in Metro = Rs. 900000
So Exempted amount of HRA will be Rs. 3,60,000 for the year.
here for HRA calculator in excel
Points to understand:
- HRA exemption is available only if you are living in
a rented accomodation.
- HRA & Home Loan benefits are two sperate
provisions. You can live in a rented accomodation & claim HRA along
with giving your own house on rent & claiming house loan benefits.
- Receipts of Rent paid are required to be submitted to
employer to enable them to provide HRA exemption.
the Financial Year
2013-14 onwards, if Annual Rent paid is more than Rs. 1,00,000, PAN
of Land Lord is mandatory. If however Land Lord does not have PAN, a
self declaration by the Land Lord (containing his name and address)
regarding this will also solve the purpose.