How much House Rent is Tax Free?

For most employees, the House Rent Allowance (HRA) is a standard component of their pay package. It is a sum that your employer gives you as part of your pay. You are eligible to receive tax benefits on the annual amount of rent you pay for housing as a taxpayer. Section 10 (13A) of the Income Tax Act applies to this. Here is all about how much rent income is tax free. 

How much House Rent Income is Tax Free?

In India, a portion of house rent allowance received by salaried individuals can be tax-exempt under Section 10 (13A) of the Income Tax Act, 1961, provided certain conditions are met.

However, the amount exempt from tax depends on specific calculations and factors.

The least of the following three amounts are exempt from tax:

• Actual HRA received.

• 50% of your basic salary + dearness allowance (DA) if you live in a metro city (Mumbai, Delhi, Kolkata, or Chennai); 40% for other cities.

• Actual rent paid minus 10% of your basic salary + DA.

For example:

• Basic salary + DA: ₹50,000/month

• HRA received: ₹20,000/month

• Rent paid: ₹15,000/month

Exempt HRA = Lesser of:

1. HRA received = ₹20,000

2. 50% of basic salary (metro) = ₹25,000

3. Rent paid - 10% of basic salary = ₹15,000 - ₹5,000 = ₹10,000

Here, ₹10,000/month will be tax free, and the remaining ₹10,000 will be taxable.

Eligibility for HRA Tax Exemption

You must check the eligibility criteria for HRA tax exemption. 

• You must receive HRA as part of your salary.

• You must be paying rent for a residential property you occupy.

• If you don’t receive HRA but still pay rent, you can claim a deduction under Section 80GG, subject to conditions.

I hope you understood how much house rent is tax free.

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Wondering

how much rent income is tax free?

The amount of House Rent Allowance (HRA) that is exempt from tax is determined by specific rules under the Income Tax Act. The exempt amount is the least of the following three criteria:

• Actual HRA received

• 50% of salary (basic salary + dearness allowance, if applicable) if the taxpayer resides in a metro city (Delhi, Mumbai, Kolkata, Chennai) or 40% of salary if the taxpayer resides in a non-metro city.

• Rent paid minus 10% of salary (basic salary + dearness allowance, if applicable).

How much Tax Free Rental Income?

Let's assume the following details for an individual:

• Basic Salary: ₹50,000 per month

• HRA received: ₹20,000 per month

• Rent paid: ₹25,000 per month

• City: Non-metro

• Basic Salary: ₹6,00,000

• HRA received: ₹2,40,000

• Rent paid: ₹3,00,000

ation of HRA Exemption:

1. Actual HRA received: ₹2,40,000

2. 40% of salary: 40% of ₹6,00,000 = ₹2,40,000

3. Rent paid minus 10% of salary: ₹3,00,000 - 10% of ₹6,00,000 = ₹3,00,000 - ₹60,000 = ₹2,40,000

The least of the above three amounts is ₹2,40,000, which is the tax-exempt portion of HRA.

HRA is fully taxable if you do not live in a rented accommodation or do not pay rent.  If you are paying rent to your parents, you can claim HRA exemption, provided you have a rental agreement and can provide rent receipts. If you live in your own house, HRA is fully taxable.

This is all about

how much rent income is tax free.

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House Rent Allowance (HRA) is a part of the salary structure of most employees. You would be happy to know that HRA isn’t fully taxable, unlike the basic salary. A part of HRA is exempted under the Income-tax Act Section 10 (13A) subject to some conditions. Let me tell you how much house rent is tax free in India:

The tax-exemption for House Rent Allowance is the minimum of:

1. i) Excess of rent paid annually over 10 percent of annual salary

2. ii) 50 percent of salary if staying in metro cities (40 percent for non-metro cities)

iii) Actual HRA received

Let me explain how much rent is tax free using an example

Let's assume Pourush with a monthly basic salary of Rs 15K, receives a house rent allowance of Rs. 7K and pays Rs. 8.4K rent for accommodation in Delhi. The tax rate applicable to him is 20% on his income under the old tax regime.

The minimum amount (yearly) is exempted:

1. i) Excess of rent paid annually over 10 percent of annual salary = Rs. 82800

2. ii) 50% of salary (metro city) = Rs. 90000 (50% of 180000)

iii) Actual HRA received = Rs. 84000 (7000 x 12)

In this case, Rs. 82800 gets exempted from tax.

Now you know

how much HRA is tax free.

I hope you like my answer on how much house rent is tax free in India.