I have a query. An assessee receives a salary of Rs 11.5/- Lakhs.The Total Income after all deductions comes out to Rs.889000/-.How much rent should he show to get whole HRA exempt. And he has already utilised the 80C limit of 1 Lakh. TDS of abt 96000/- is still deducted. Please suggest what can be done to claim refund or reduce the tax to 2000-3000 Rs. This is urgent.
1) amount equal to 50% of salary if the residential house situated at Bombay, Culcutta, Delhi or Madras and amount equal to 40% of salary where the residential house is situated at any other place;
2) House rent allowance received by the employee in respect of the period during which the rental accomodation is occupied by the employee during the previous year;
3) the excess of rent paid over 10% of salary.
"Salary" for the purpose of HRA exemption means basic salary and includes dearness allowances if terms of employment so provide. It also includes commision based on a fixed percentage of turnover achieved by an employee as per terms of contract of employment - Gestetner Duplicators (P.) Ltd v. CIT [1979] , BUT EXCLUDES ALL OTHER ALLOWANCES AND PERQUISITES.
SO MAXIMUM ALLOWABLE WOULD BE WHAT COMPANY PAYS TOWARDS HRA. As given in your example, MAXIMUM OF 15000/- P.M. WOULD BE ALLOWABLE.
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