www.Aaptaxlaw.com
 
 

 

HRA Income Tax Exemption Calculation for Employees and Professionals. Download House Rent Allowance Exemption formula and calculator in MS Excel.

House Rent Allowance Exemption for Employees

House Rent Allowance is Part of breakup of salary in most of the organisations. Employers are following different ratios for HRA and this amount is being given to the employee to meet the cost of rented house taken by them. As per Section 10(13A) and Rule 2A employees can claim exemption against House Rent Allowance Received. But entire HRA cannot be deducted. HRA is Allowance and is subject to income tax.

Employees can claim exemption against rent paid by them. The rented premises must not be owned by the employee. If the employee is residing in his own house, the entire HRA received is taxable. If the rented house is not owned by the employee, exemption of House Rent Allowance is available upto the lowest of the following three options:

1. Actual Rent or HRA received from the Employer

2. Actual House rent paid by the employee minus 10% of basic salary

3. 50% of Basic salary for those who live in metros and 40% of basic salary for others.

 

Salary means basic salary including Dearness Allowance, if the terms of employment provides for it, and commission on fixed percentage of turnover achieved by the employee. Deduction of HRA is available only for the period when the employee is occupied the house, not after that.

Salary for calculation of HRA

- Basic Salary + DA + Fixed percentage of commission on turnover

- Amount of salary due is taken for calculation

Calculation of House Rent Allowance (HRA) Exemption (example)

1. Basic Salary Rs. 2,40,000/- (Rs. 20,000 * 12)

2. Dearness Allowance (DA) Rs. 60,000/- (Rs. 5,000 * 12)

3. House Rent Allowance (HRA) Received Rs. 1,20,000/- (Rs. 10,000 *12)

4. Actual Rent paid Rs. 1,20,000/- (Rs. 10,000 * 12)

Calculation of HRA Exemption

Lowest of the Following amount shall be exempted

- Actual HRA Received Rs. 1,20,000/-

- Rent paid in excess of 10% of Salary Rs. 90,000/- (Rs. 120000-30000)

- 50% of Salary in Metros i.e. Rs. 1,50,000/-

or 40% of Salary in other cities i.e Rs. 1,20,000/-

Therefore, Rs. 90,000/- (the lowest amount) shall be exempted against HRA and balance amount of Rs. 30,000 will be taxable.

Rent can be paid to Parents

The Assessee can pay rent to parents. Parents should include the rental income income for tax calculation.

Rent cannot be paid to Spouse

The assessee cannot pay rent to spouse, since both are usually residing in same house.

Proof of HRA claimed should be kept

Rent receipt or other proof for paying rent should be kept to avoid complications.

Tax Benefits from Housing loan and HRA can be availed simultaneously

If you are living in another city, you can claim amount of rent paid and amount housing loan interest simultaneously.

House Rent Exemption for Professional and Others

Self employed professionals are not considered for House Rent Allowance Exemption as they are not earning salary. But they can claim house rent expenses incurred under Section 80GG. Exemption for House rent paid under Section 80GG will be lowest amount of the following:

Calculation of HRA Exemption under Section 80GG

1. Rent paid minus 10% of adjusted total income

2. Rs. 5000 per month (from FY 2016-17) earlier Rs. 2000 per month

3. 25% of adjusted total income

Calculation of Adjusted total Income Under Section 80GG

Gross Total Income

Less:

Short Term Capital Gain of 10% category

Long Term Capital Gain

Deduction under Section 80C to 80U (except 80GG) and income of Foreign Company.

   
 
 

Home     About Us     Privacy Policy     Disclaimer    Contact Us  Sitemap