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Hra exemption / rent deduction

Sameer (Manager) (29 Points)

14 May 2012

As part of my salary, I can restructure it based on my desire under various heads like HRA/LTA/Medical etc..

As of today, I have amount allocated under HRA, and claim rent paid as HRA exemption under sec 10.

I want to understand - can I make HRA as zero and claim rent paid as "Rent Deduction" under Chapter VI.. Is there any benefit of doing so?

Don't know the rules.. but saw the sections hence wanted to know if any tax planning around it can help in saving tax..

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C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 14 May 2012

No you can not do like this.

Rent paid only claim as HRA.

Condition for HAR

As per the Indian income tax law, the HRA exemption should be calculated as the least of the following.

1. Rent paid in excess of 10% of basic salary.

2. Actual HRA received by the employee.

3. Forty percent of basic salary, if the location of the residence is in a non-metro city/town or 50% of basic salary, if the location of the residence is in a metro city

From the above “least of three” rule, it is clear that HRA exemption amount is determined by a number of factors — Basic pay, location of the residence, rent paid by the employee, and the HRA paid to the employee.