U.C Date : 10 May 2016
What is House Rent Allowance?
House Rent Allowance (HRA) is an allowance paid by employer to its employees for covering their house rent. Such allowance is taxable in the hand of employee. However, Income Tax Act provides deduction of hra under section 10(13A) subject to certain limits.
HRA Deduction Calculation
A deduction from such HRA is allowed u/s 10(13A), which is least of the following: –
- HRA received
- 40% of salary (50% of the salary if the rented property is in Metro City i.e. Mumbai, Delhi, Chennai or Kolkata)
- Actual rent paid less 10% of salary
Meaning of salary for HRA exemption calculation
- Salary includes basic salary, dearness allowance (if it enters into retirement benefits) and fixed percentage commission on turnover achieved by employee.
- Salary is taken on due basis for HRA calculation.
- Salary is taken only for the period for which House Rent Allowance is received.
Conditions to be satisfied for claiming HRA deduction
- This deduction is allowed only when rent is actually paid by the employee for his residence purpose. If no rent is paid for any period then no deduction is allowed for that period.
- If there is any change in the amount of salary, rent or HRA or city of residence from metro to non-metro or vice versa during the year then such deduction is calculated on monthly basis.
- Even if rent is paid to any family members, HRA is allowed. There is no legal requirement but it is advisable to pay such rent on monthly basis and through bank transfer. (Bajrang Prasad Ramdharani 2013 ITAT)
- There is no requirement that employee should not own a house property. If employee resides in a rented property, he can claim exemption even if he owns a house property in the same or different city.
- Deduction of house rent allowance, home loan interest under section 24b, repayment of housing loan under section 80C can be claimed simultaneously.
- If an employee receives HRA which is allowed as deductible under this section then no deduction is allowed under section 80GG.
- If maintenance charges are paid separately then no deduction is available for the maintenance charges.
Want your employer to take HRA deduction into consideration and thus deducting lower TDS
- Form no. 12BB is to be submitted with the employer if the total rent paid during the year exceeds Rs. 1,00,000. Name, address and PAN of the landlord is to be submitted in this form. If there is more than one landlord then details of all landlord is to be submitted. (Income-tax (11th Amendment) Rules, 2016)
Form 12BB in Excel Format
- In case the landlord does not have a PAN, a declaration to this effect from the landlord, along with the name and address of the landlord should be given to the employer. (Circular no. 8/2013)
Declaration by House Owner/Landlord if he doesn’t have PAN in Word format
- Employee are exempted from production of rent receipt to employer, if the house rent allowance is upto Rs.3000/- per month. It may, however, be noted that this concession is only for the purpose of tax-deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent. (Circular no. 8/2013)
Use our House Rent Allowance (HRA) Calculator to calculate your annual/monthly exemption available for HRA.
|Basic Salary + Dearness Allowance (Rs 1,00,000 * 12)||
|HRA (Rs 45,000 *12)||
|Rent of house in Delhi (Rs 30,000 * 12)||
|a) HRA received||
|b) 50% of the salary as the rented property is in metro city||
|c) Actual rent paid less 10% of salary (3,60,000 – 1,20,000)||
|HRA Exempt u/s 10(13A) (least of the above)||
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(a) the residential accommodation occupied by the assessee is owned by him ; or (b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him The limits to which deduction is allowed under sec 10(13A) is given in rule 2A – Rule 2A – The amount which is not to be included in the total income of an assessee in respect of the special allowance referred to in clause (13A) of section 10 shall be— whichever is the least. Explanation : In this rule—
Bare Act for Sec 10(13A)
Bare Act for Sec 10(13A)
the actual amount of such allowance received by the assessee in respect of the relevant period; or
the amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessee in respect of the relevant period; or
an amount equal to—
where such accommodation is situate at Bombay, Calcutta, Delhi or Madras, one-half of the amount of salary due to the assessee in respect of the relevant period; and
where such accommodation is situate at any other place, two-fifth of the amount of salary due to the assessee in respect of the relevant period,]
“salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule;
“relevant period” means the period during which the said accommodation was occupied by the assessee during the previous year.]
(a) the residential accommodation occupied by the assessee is owned by him ; or
(b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him
The limits to which deduction is allowed under sec 10(13A) is given in rule 2A –
Rule 2A – The amount which is not to be included in the total income of an assessee in respect of the special allowance referred to in clause (13A) of section 10 shall be—
whichever is the least.
Explanation : In this rule—