HRA (House Rent Allowance) is the allowance that an employer provides to their employee as compensation for house rental expenses that the employee pays. It is a part of the salary that the employer pays to their employee. Now let me tell you about the eligibility criteria and how to calculate HRA in income tax.
Who Can Claim Tax Deduction on HRAAccording to Income Tax Act’s Section 10(13A), a part of HRA can be claimed as a tax deduction as per eligibility criteria:
You should be actually paying house rent, meaning the rent receipts must be issued in your name.
You should be living in a rented house.
You should be receiving House Rent Allowance as a salary component.
You should be a salaried individual.
The amount of tax deduction that you can claim over House Rent Allowance is the least of the following:
Actual rent paid minus 10% of basic salary; or
50% of basic salary if you live in metro cities like Delhi or Mumbai (40% for non-metros); or
Actual House Rent Allowance received
Let’s say I am a salaried individual in Kolkata and receive a basic salary of Rs. 50000 monthly. The actual rent that I pay is Rs. 10000 but the HRA in my salary is Rs. 15000. Now, the money that will be exempted on the basis of this information is:
S.no. |
Particulars |
Amount |
1 |
Actual rent paid (Rs. 10000 x 12 = Rs. 120000) – 10% of basic salary (Rs. 60000) |
Rs. 60000 |
2 |
Actual HRA received annually (Rs. 15000 x 12) |
Rs. 180000 |
3 |
50% of basic salary [(Rs. 50000 x 12) x 50%] |
Rs. 300000
|
|
HRA deduction |
Rs. 60000 (least of all) |
Rs. 132000 will be exempted from income tax. I hope now you know how to calculate HRA exemption in income tax!
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Authors Of The Question
How to calculate HRA in income tax?
Karmaditya
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3 Year
2021-08-26T17:41:29+00:00 2021-08-27T10:09:38+00:00Comment
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