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House Rent Allowance - HRA:
(Section 10(13A) of the Income Tax Act)

House Rent Allowance or HRA is a benefit given by 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 employee.

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.

Who 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 for HRA 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 Exemption


Extent of HRA exemption depends on four things -
  • HRA given by employer,
  • Annual salary,
  • Rent paid and
  • the city in which you live.
Considering the above four, exemption of HRA is calculated and least of the following is allowed as exemption from Tax:
  1. Amount of House Rent Allowance (HRA) received
  1. Rent paid minus 10% of salary; and
  1. 50% 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. 
Click here for HRA calculator in excel


Salary for HRA Calculation:


Salary for the calulation of HRA means total of-
  1. Basic Salary,
  2. Dearness Allowance (DA) and 
  3. Commission.
Example to understand HRA calculation:

Suppose Mr. A working with a company for basic salary ₹ 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:
  1. HRA = 12*40000 = ₹ 480000
  1. 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
  1. 50% of Salary as living in Metro = Rs. 900000
So Exempted amount of HRA will be Rs. 3,60,000 for the year.

Click 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.
  • From 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.
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Some other important Links

Fair Market Value of Property purchased before 2001-How to calculate?

Standard deduction from salary of 50000/-...read in detail...

Deduction for mediclaim/health insurance premium-Section 80D

Deduction for maintenace of a differently abled dependent-Section 80DD

Deduction for Interest on Education Loan u/s 80E

Deduction U/s 80U to the Differently Abled

Deduction for Savings Bank Interest 10000 u/s 80TTA

Deduction for Interest for Senior Citizens 50000 u/s 80TTB

How to Donate to PMNRF(Prime Minister Relief Fund)-Deduction u/s 80G

Deduction for rent paid u/s 80GG

How to Donate to PMCARES-Deductible u/s 80G

Dont miss to link PAN with AADHAR. How to link PAN & AADHAR Read in detail...
Deduction for mediclaim/health insurance premium-Section 80D

Deduction for maintenace of a differently abled dependent-Section 80DD

Deduction for Interest on Education Loan u/s 80E

Deduction U/s 80U to the Differently Abled

Deduction for Savings Bank Interest 10000 u/s 80TTA

Deduction for Interest for Senior Citizens 50000 u/s 80TTB

How to Donate to PMNRF(Prime Minister Relief Fund)-Deduction u/s 80G

Deduction for rent paid u/s 80GG

How to Donate to PMCARES-Deductible u/s 80G

Dont miss to link PAN with AADHAR. How to link PAN & AADHAR Read in detail...
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