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Hra allowance

CA Gaurav Choradia (Relationship Manager ) (418 Points)

07 May 2013

As per sec 10 (13A) the lower of following is Exempted

Actual HRA received or
"Rent paid" - 10% of salary; or
40% or 50% of basic salary

is Rent payment is mandatory? If as per rent agreement rent is payable on half yearly or yearly basis and during the FY no payment is not but to be made (as oustanding liability), will assessee get the exemption?

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2 Replies

Sonam Bidasaria (CA) (770 Points)
Replied 07 May 2013

Point b of Rule 2A of Income Tax Rules clearly states that

"the amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessee in respect of the relevant period"

In case, the assessee does not pay rent during the previous year, he will not get any allowance under Sec 10(13A). Full HRA will be taxable.

In one of the clarification given by the income tax department, it has been stated:

"Though for purposes of grant of house rent allowance, a rent receipt may not be insisted upon by Government, it is necessary for granting the exemption under section 10(13A) that the employee should have actually incurred the expenditure on rent. For purposes of deduction of tax, therefore, the disbursing officer should ensure that the employee concerned has in fact incurred the expenditure on rent. The payment of rent should be verified through rent receipts in the cases of all employees."