The cost of House Rent Allowance (HRA) also provides for tax exemptions. Several sections of the Income Tax Act help self-employed people and professionals as well as salaried individuals to make their rent expenses cheaper. It is only offered to employees when they live in rented residential premises. Now let me explain you how the house rent deduction in income tax section is done:
Exemption Limit:The least amount from the below options is considered for tax exemption:
Actual HRA received
40% of salary if living in non-metro cities or 50% for metro cities
Excess of rent paid annually over ten percent of the annual salary
Let’s assume I live in Delhi and get a basic salary of Rs. 40000 monthly. The HRA in my salary is Rs. 20000 but the actual rent I pay is Rs. 15000. Let’s see how much money will be exempted based on this info:
S.no. |
Particulars |
Amount |
1 |
50% of basic salary [(Rs. 40000x12) x 50%] |
Rs. 240000
|
2 |
Actual rent paid (Rs. 15000x12 = Rs. 180000) – 10% of salary (Rs. 48000) |
Rs 132000 |
3 |
Actual HRA received in the year (Rs. 20000x12) |
Rs. 240000 |
4 |
HRA deduction = Least of all |
Rs 132000 |
Since Rs.132000 is the least amount out of all the options, you’ll get the exemption of Rs. 132000 from income tax. I hope now you understand how the house rent deduction under income tax is done!
Authors Of The Question
How house rent is deducted from income tax?
Vikash
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3 Year
2021-08-13T14:47:52+00:00 2021-08-16T19:26:02+00:00Comment
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