House rent allowance

This query is : Resolved

mangesh dhumal (Querist)
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11 October 2011 My friend is drawing a salary of Rs.33500 per month which includes hra amounting to rs.10000/- However he is paying Rs.7000/- towards house rent then how much tax be deducted from his salary ? His investment under 80c is Rs.50000/-.

CA SUMiT PATWARi

CA SUMiT PATWARi (Expert)
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11 October 2011 The exemption of HRA will be available up to the the minimum of the following three options:

1.Actual house rent allowance received from your employer(Rs 10,000)
2.Actual house rent paid by you minus 10% of your basic salary (Rs 7000 - 10% of Basic Salary)
3.50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non-metro (50% of Basic Salary or 40% of Basic Salary as applicable)

Please see the basic salary component(Basic salary includes DA, if terms of employment so provide and also includes commission based on fixed % of turnover achieved by employee; Basic = Basic + DA + Comm, as explained) out of the gross salary of Rs33,500 and calculate the exemption eligible for HRA using the above formula.

After providing exemption for HRA, compute Gross Total income before deduction under chapter VIA. Now allow Rs50000 u/s 80C as deduction to arrive at taxable income.

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