How much deduction on hra

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 June 2018 Case1: salary earned(Basic+DA) Rs 850000 p.a

HRA received 98000 p.a
staying in hyderabad.

Paying rent is Rs 25000 pm * 12=300000 p.a
Can I show such Higher rent in the return.
What i need to produce in such case.Please clarify.Thank you

ALKESH T MEHTA

ALKESH T MEHTA (Expert)
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13 June 2018 You need ton produce rent receipt.
1.Actual Rent i.e.Rs.25000/-p.m.*12=Rs.300000/-p.a.
2.40% of salary i.e.Rs.340000
3.Excess of Rent paid over 10% of salary i.e.Rs.300000/--Rs.85000/-=Rs.215000/-
Minimum of above i.e.Rs.215000/- is exempted & Rs.85000/- is taxable H.R.A.
In return you will be required to show Rs.85000/-as taxable allowane.

Querist : Anonymous

Querist : Anonymous (Querist)

13 June 2018 Sir
HRA actually Received is Rs 98000
I didn't understand how Rs 85000 will be taxable allowance.
please clarify

ALKESH T MEHTA

ALKESH T MEHTA (Expert)
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14 June 2018 In my previous reply,I replace the word Actual H.R.A. received instead of actual rent which is correct.
1.Rs.98000/-*12= Rs.1176000/-
2.Rs.340000/-
3.Rs.85000/-is actual rent paid by you reduced by 10% of salary I.e.10%of Rs.850000/-

2.340000/-

Querist : Anonymous

Querist : Anonymous (Querist)

14 June 2018 Case1: salary earned(Basic+DA) Rs 850000 p.a
HRA received 98000 p.a staying in hyderabad.
Paying rent is Rs 25000 pm * 12=300000 p.a
so as you said
1.Actual HRA Received 98000
2.40% of salary (850000*40%) 340000
3.Excess Rent paid over 10% salary 215000
300000-10%(850000)

Hence Lower of the above i.e 98000 will be allowed as deduction is it correct sir.
Is Rent Receipt enough or any other proofs required like agreement etc.because amount of rent is Rs 300000 p.a

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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28 July 2024 Yes, you’ve understood the calculation of HRA (House Rent Allowance) correctly. Let’s break down the process for calculating the HRA exemption and clarify the documentation needed:

### HRA Deduction Calculation

For the purpose of calculating HRA exemption under Section 10(13A) of the Income Tax Act, you need to consider the following factors:

1. **Actual HRA Received:**
- Amount received as HRA: ₹98K per annum

2. **HRA Exempt Calculation:**
The HRA exemption is the minimum of the following three amounts:

1. **Actual HRA Received:** ₹98K
2. **40% of Basic Salary:** Since you are staying in Hyderabad, which is considered a metro city, the exemption calculation is based on 50% of the salary.
- Basic Salary + DA: ₹8.50L per annum
- HRA Exemption (50% of Salary): 50% of ₹8.50L = ₹4.25L
3. **Excess Rent Paid Over 10% of Salary:**
- Rent Paid: ₹25K per month × 12 = ₹3L per annum
- 10% of Basic Salary: 10% of ₹8.50L = ₹85K
- Excess Rent Paid Over 10% Salary: ₹3L - ₹85K = ₹2.15K

**Therefore:**
- Minimum of Actual HRA Received, 50% of Salary, and Excess Rent Paid Over 10% of Salary:
- ₹98K (Actual HRA Received)
- ₹4.25L (50% of Salary)
- ₹2.15L (Excess Rent Paid Over 10% Salary)

**The exempt amount of HRA is ₹98K** because it is the lowest of the three calculated amounts.

### Documentation Required

To claim HRA exemption, you should maintain the following documentation:

1. **Rent Receipts:**
- You need to produce rent receipts showing the monthly rent paid and the total amount paid annually.
- The receipts should ideally have the landlord's name, address, PAN (if available), and the amount of rent paid.

2. **Rent Agreement:**
- Although not mandatory for every situation, it is advisable to have a rent agreement in place. This document serves as evidence of the rental arrangement and can be useful in case of any disputes or clarifications.

3. **Landlord's PAN Details:**
- It is not mandatory to provide the landlord's PAN, but having it on the rent receipts or agreement helps in compliance and avoids any queries from the tax authorities.

4. **Proof of Payment:**
- In addition to receipts, having proof of payment such as bank statements or electronic transfer records showing rent payments can strengthen your claim.

### Summary

- **HRA Exemption Calculation:** The exemption amount you can claim is ₹98,000, based on the minimum of actual HRA received, 50% of salary, and excess rent paid over 10% of salary.
- **Documentation:** Rent receipts are necessary, and while a rent agreement is not mandatory, it is highly recommended. Proof of payment can also be useful.

By keeping these documents and following the proper calculation, you can ensure that your HRA claim is valid and compliant with tax regulations.

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