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Querist : Anonymous

Querist : Anonymous (Querist)

28 September 2011 Hi Sir,
please tell me what menas by the term excess of rent paid over 10 % of salary

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)

28 September 2011 It means=(Rent paid - 10% of salary)

I think you are asking for HRA Exemption.

exemption of HRA will be available up to the the minimum of the following three options:

#Actual house rent allowance received from your employer
#Actual house rent paid by you minus 10% of your basic salary
#50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non-metro

This minimum of above is allowed as income tax exemption on house rent allowance.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)

28 September 2011 Meaning of Salary for calculation the exemption of HRA

Salary means (Basic + D.A + Commission based on fixed percentage on turnover).
Salary is to be taken on due basis in respect of the period during which the period accommodation is occupied by the employee in the previous year.

Examples for calculation of exemption/deduction of HRA

X has received following amount during the previous year.

Basic Salary – Rs. (5000*12) – Rs. 60,000/-
Dearness Allowance (D.A) – Rs. (1000*12) – Rs. 12000/-
House Rent Allowance (H.R.A.) – Rs. (2000*12) – Rs. 24000/-
Actual Rent Paid – Rs.(2000*12) – Rs. 24000/-

Calculation

The minimum of the following amount shall be exempt

Actual HRA received (2000*12) – Rs. 24000/-
Rent Paid in excess of 10% of salary ( 24000-7200) – Rs. 16800
40% of Salary – Rs. 28800/-

Therefore, Rs. 16800 shall be exempt and the balance Rs. 7200 shall be included in gross salary.

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