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House Rent Allowance Exemption

Computation of House Rent Allowance Exemption (HRA):

House Rent Allowance Exemption (HRA) is taxable under the head “Income from Salaries”. It is taxable to the extent it is not covered with in the exemption. Least of the following 3 is exempt.

  • Actual HRA received by the employee for the relevant period in financial year.
  • Excess of rent paid over 10% of the salary during the relevant period in the financial year.
  • 50% of the Salary if house is situated in Delhi, Mumbai, Kolkata or Chennai and 40% of the salary if house is situated at any other place.

The minimum of above 3 is exempt and balance HRA is subject to tax.

Download: HRA_Exemption_Calculator_File.

Note:

  1. Salary includes Dearness Allowance but excludes an other allowance or perquisite. DA is considered to the extent it is part of the salary.
  2. Relevant period means the period when employee has occupied the accommodation during the financial year.
  3. If the employee stays in his own accommodation or the employee has not incurred expenditure, no HRA exemption is available in such cases.
  4. The employee is required to furnish the PAN of landlord if annual rent paid exceeds Rs.100,000. Please check the CBDT Circular and law in detail regarding submission of Landlord PAN.

Recommended: You may also consider to read as what an employee should do if Landlord has refused to furnish his PAN.

Download: HRA_Exemption_Calculator_File.

Example:

Salary detail for the financial year is as follows:
Basic Salary: 30,000 PM
HRA: 15,000 PM
Rent Paid: 13,500
Employee resides in Delhi. Calculate HRA exemption.

Minimum of the three is exempt:
(a) – Actual HRA Received: 15,000 X 12 = 180,000
(b) – Excess of Rent paid over 10% of salary: (13,500 X 12) – 10% of (30,000 X 12) = 126,000
(c) – 50% of Salary (Employee resides in Delhi): 15,000 X 12 = 180,000

Least of the above three is Rs.126,000

Total HRA Received: 180,000
Exempt: 126,000
Amount Taxable: 54,000.

Download: HRA_Exemption_Calculator_File.

Note: If employee has different salary / Rent paid during any time during the financial year then exemption amount will vary as per the relevant period.

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