House Rent allowance (HRA) exemption calculation is most easiest calculation in income tax For us,yet it is most complicated for many.But now I have decided to make it simple.I have prepared a set of FAQ on HRA exemption calculation and hope it will definitely helpful for many to understand the topic in simple way.
HRA exemption calculation is dependent on Four variable.
as per section 10(13A) read with rule 2A ,least of following three will be exempted
- House Rent allowance (HRA) received.
- 50% of salary in case of residential accommodation taken on rent is situated in Bombay ,Calcutta ,Delhi, or Madras (Chennai) and 40 % of salary in in any other case.
- Rent paid in excess of 10 % of salary.
Relevant section of the income tax is reproduced hereunder
Section 10(13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant considerationsExplanation.—For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where—(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
Rule 2A as per Income Tax Rules(Limits for the purposes of section 10(13A)).
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(a) the actual amount of such allowance received by the assessee in respect of the relevant period; or(b) 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(c) an amount equal to(i) 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(ii) 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,(d) [***]whichever is the least.Explanation : In this rule(i) salary shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule;(ii) relevant period means the period during which the said accommodation was occupied by the assessee during the previous year.(iii) [***]
1.How to calculate HRA exemption ,monthly or yearly?
Ans: HRA exemption calculation is depended on four variable as shown above,if all of these remains same in a year then you can calculated it on yearly basis otherwise for each set of of variable ,you have to do separate calculation .suppose DA is changed then you have to calculate separate calculation.(READ DETAILS HERE)
2. I have received salary arrears of last years.For HRA exemption arrears is to be included or not?
Ans : For HRA exemption ,salary of the relevant period for which we are calculating exemption is to be taken .so arrears are not be included for HRA purposes .salary on due basis is to be taken.
3. As per Sixth Pay commission ,Grade pay has been added in Basic Pay ,whether it is part of salary for Calculation of HRA exemption ?
Ans: as per sixth pay commission
Basic pay = Pay in pay band plus grade pay
so according to 6th cpc grade pay is part of basic pay .and basic pay you are referring is actually pay in pay band .in brief grade pay is to be included for salary as per HRA exemption calculation.
4. I am a doctor and receiving NPA (non practice allowance) ,and it is also considered in most of the retirement benefits .Is NPA to be included in salary for HRA exemption ?
Ans.No ,it is not.As per section 10(13A) ,only DA is to be included in the salary for HRA exemption calculation.
5.To claim HRA exemption ,my DDO is asking for Rent payment receipt from my landlord .what should I do?
Ans: Give him ,what he asking for .yes produce the house rent payment receipt to him.Actually DDO(drawing and disbursing officer) is responsible to deduct TDS from salary ,so to avoid penalties at later stage ,he has to verify all the saving proofs ,rent receipt etc from the employee.and if employee is unable to produce the same then DDO is empowered to reject the claim of the employee.
6.Is it necessary to Give Landlord's Pan number on rent receipt ?
Ans::Update :Landlord's Pan mandatory for payment exceed more than Rs 1,00,000 per annum wef financial year 2013-14
Landlord pan is mandatory if rent paid iss in excess of Rs 180000/- read more here(Fy 2011-12 & 12-13)
7. My friend have informed me that there is a cut off amount for rent paid after which only,rent receipt is required.Is it true?
Ans: yes and No .Yes because there is a cut off Limit .No because the cut off limit is for HRA received PM and not for House rent paid.Those employees ,who are receiving house rent up to 3000 per month are not required to submit Rent receipt to DDO.I repeat this 3000/- limit is for house rent received and House rent paid in this case may be more than 3000/-.
8. I have produce rent receipt to my DDO but he his now asking for rent agreement ?
Ans: Rent receipt is enough to claim the HRA exemption ,and I request to your DDO, please do not ask for rent agreement . (jane bhi do yaar ,main bhi DDO hoon ,koi jarroorat nahin hain rent agreement ki ,rent receipt de to di aap ko ).On the reverse ,if employee has submitted a rent agreement only then DDO should ask for rent receipt as the rent agreement is not a proof of payment.
9.My DDO /employer has rejected my HRA exemption and deducted the tax accordingly.Further nothing has been mentioned about HRA exemption in Form 16 issued by the employer .Can I claim HRA exemption while filing my Income tax return?
Ans:yes ,you can .If employer has not considered your HRA exemption claim then you can claim the same while filing your income tax return even nothing has been mentioned about HRA/HRA exemption in Form 16.
10.I have paid rent to my wife/Father .Can I claim HRA exemption?
Ans: if this is actual payment then yes you can claim rent exemption even if the rent is being paid to your family members .But remember House must be on their name or he/she must be authorise to receive rent on the property.Though the above point have no relation with HRA exemption but tax planning should be done carefully and remain with in limit .
11.Both of us (husband /wife) are working and leaving in same house on rent .we both want HRA exemption .it it in order?
Ans: yes ,you can.But subject to that rent is shared/paid by both of you and individually,both of you can claim exemption up to share of rent paid actually paid by you.
12.I am claiming HRA for three months and moving to own residence after that. When the HRA is calculated, will it take into consideration the basic for three months or basic pay for entire year? i.e., will the calculation be = Actual rent - 10% of annual basic or Actual rent - 10% of three month basic ?
Ans:calculate salary & House rent paid month to month basis and then calculate full year year exemption by aggregating all month in your case exercise is required to be done for three months only.
13. Can i get HRA exemption and interest of House loan and principal amount both the amounts, if i am not staying in my own house because it is in other city
Ans :yes ,You can claim both HRA & House loan interest if you are staying at other place due to employment
14.I am paying rent for house at delhi where my family is living and also paying rent for accommodation in another city where i am employed. can i claim HRA exemption for total rent paid by me for both the accommodation?
Ans . As per rule 2A ,rent paid is to be considered for only one house in which assessee is residing and paying the rent .so you can claim rent for only where you are residing ,not on house in which family is living
15: what if i have a house in my name ,and another house joined to my house in mother name
can i get hra benefit if i pay rent to my mother ?
Ans:You can claim HRA only if you have actually paid it ,in this case also ,i you have paid rent to your mother ,then you can claim HRA exemption benefit. Further if you show House rent payment and claim HRA exemption then your own house will be deemed to be let out and you have to add rent in your income for that house.so on one side your income will be reduced by HRA exemption ,on the other side you have pay tax on deemed rent for house owned by you.Overall no benefit in doing this.
16 :I have been taken a House loan and my house is under construction.I am paying 12000 as EMI. Can I take HRA exemption?
Ans:You can Claim Hra Benefit till your house completed subject to that you have actually paid the Rent .Further in future also, you can continue to claim HRA benefit ,if your house is at a location, other than where you are employed or you will give house for a rent .
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