ICICI

How to calculate House Rent Allowance (HRA) Exemption

VISHAL BANSAL 
on 16 November 2018


House Rent Allowance  exemption under section 10(13A) is allowed if Salaried individuals getting House Rent Allowance  as part of salary and full fill below two conditions:

  1. He has taken a residential accommodation in which he resides on rent.
  2. He has not occupied such property in which he resides.

If you don’t live in a rented accommodation. You live with your parents in their house. In that case also, you can claim HRA. However there should be a rent agreement, and parents must show this rental income in their Income Tax Return.

How to calculate HRA : Use HRA exemption calculator-

HRA Exemption can be claimed whichever is least on the following basis:-

  • Actual HRA Received
  • Rent paid minus 10% of Salary
  • 40% of salary if he resides in Non Metro City or 50% of salary if resides in Metro City.

If rent paid during the financial year exceeds Rs.1,00,000, PAN of landlord is necessary.

For Example

Mr. Sumit employed in Chandigarh.

He has paid a rent to Mr. X of Rs 1,44,000 during the financial year 2017-18.

His basic salary is Rs. 3,60,000 and House Rent Allowance received of Rs 1,80,000.

What is exemption of HRA?

Solution:

Mr. Sumit can claim HRA exemption as below(whichever is the least)

* SALARY means BASIC SALARY + D.A.(if any)


1. Actual HRA Received 1,80,000
2. Rent Paid minus 10% of Salary i.e. 1,44,000-(10% of 3,60,000) 1,08,000
3. 40% of Salary because he is living Non Metro City 1,44,000

So, Mr. Sumit is eligible for HRA Exemption under section 10(13A) of Rs. 1,08,000 in the financial year 2017-18 and Rs. 72,000 i.e.(1,80,000-1,08,000) is taxable


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