Organizations in India follow different methods for arriving at the House Rent Allowance (HRA) exemption, while calculating income tax on employee salary. Each method produces a different exemption amount. This begs the question, “which is the correct method?” Payroll managers have different opinions on how the exemption should be calculated. Let us examine the methods used for the HRA exemption calculation, and see which method goes well with the letters and spirit of Section 10(13A) of the Income Tax Act, 1961.
As per the Indian income tax law, the HRA exemption should be calculated as the least of the following.
1. Rent paid in excess of 10% of basic salary.
2. Actual HRA received by the employee.
3. Forty percent of basic salary, if the location of the residence is in a non-metro city/town or 50% of basic salary, if the location of the residence is in a metro city
From the above “least of three” rule, it is clear that HRA exemption amount is determined by a number of factors — Basic pay, location of the residence, rent paid by the employee, and the HRA paid to the employee.
So far, so good. The “least of three” rule looks easy to understand and implement. However, the same rule can be applied in different ways to create different methods of HRA exemption calculation.
Let us assume that an employee, who lives in a metro city, takes home a monthly Basic pay of Rs 50,000, monthly HRA of Rs 25,000, and pays a monthly rent of Rs 25,000. As long as everything remains constant throughout the year, there is no complication. The problem starts once any of the factors changes. Let us assume that the employee has a loss of pay for a month and half, say from August 1 to September 15, but the employee pays full rent in the months of August and September. Let us look at the different methods of calculating the exemption.
Method 1 – Annualized HRA exemption calculation
Organizations using this method calculate HRA exemption by determining the values of the different factors (Basic pay etc.) for the year and applying the “least of three” rule.
a. Basic pay for the year = Rs 50,000 x 10.5 months (on account of loss of pay) = Rs 525,000.
b. HRA paid to the employee = Rs 25,000 x 10.5 months (on account of loss of pay) = Rs 262,500.
c. Rent paid by the employee for the year = Rs 25,000 x 12 = Rs 300,000.
HRA exemption calculation
1. Rent paid in excess of 10% of Basic salary = Rs 300,000 – Rs 52,500 = Rs 247,500.
2. Actual HRA received by the employee = Rs 262,500.
3. Fifty percent of Basic salary (since the location of the residence is in a metro city) = Rs 262,500.
The HRA exemption for the year is the least of the above, which is Rs 247,500.
Method 2 – Monthly HRA exemption calculation
Organizations using this method calculate HRA exemption each month, and add the monthly HRA exemption values to arrive at the exemption for the year.
1. Monthly HRA exemption amount — after applying the “least of three” rule for each month — from April to July and from October to March = Rs 20,000 per month.
2. Monthly HRA exemption amount — after applying the “least of three” rule — for August = Rs 0.
3. Monthly HRA exemption amount — after applying the “least of three” rule — for September = Rs 12,500.
The total of HRA exemption amounts across all months = Rs 212,500 for the year.
Method 3 – HRA exemption calculation for each period of input change
As per this logic, whenever any of the input parameters (Basic pay, Rent paid, HRA, and Metro or Non-metro) changes for an employee during a year, the HRA exemption is calculated. In other words, the year is divided into as many periods as dictated by changes in any of the input parameters, and HRA exemption is calculated for each of the periods. Finally, the HRA exemption amounts for the different periods are aggregated to arrive at the HRA exemption amount for the year.
With regard to the illustration presented earlier, the year is divided into 3 periods, as follows.
Period 1: From April 1 to July 31 – when there is no change to any of the input factors.
Period 2: From August 1 to September 15 – when Basic pay and HRA change (became zero) on account of loss of pay.
Period 3: From September 16 to March 31 – when there is no change to any of the input factors.
HRA exemption calculation
HRA exemption for period 1– from April 1 to July 31 = Rs 80,000.
HRA exemption for period 2 — from August 1 to September 15 = Rs 0.
HRA exemption for period 3 — from September 16 to March 31 = Rs 130,000.
The total of HRA exemption amounts across all periods = Rs 210,000 for the year.
The 3 methods yield different annual HRA exemption amounts – Rs 247,500, Rs 212,500, and Rs 210,000.
This is an important question to answer. Depending on the method an organization uses, the tax liability for the employee would be higher or lower, and in turn the government’s receipt from tax on salary income would be higher or lower.
The above illustrations present HRA exemption calculation in the event of changes in Basic salary and/or HRA. In the event of Basic salary or HRA not changing, but the rent amount changing or the location of the residence changing (say, from metro to non-metro), there will still be differences in HRA exemption calculation across the 3 methods.
While there is no explicit instruction from the income tax department as to which method should be used, we believe the “period” method (Method 3, described above) goes well with the provisions of Section 10(13A) of the Income Tax Act.
Important :Landlord pan is mandatory if rent paid iss in excess of Rs 180000/- read more here
Important :Landlord pan is mandatory if rent paid iss in excess of Rs 180000/- read more here
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i have worked for 3 1/2 in the assessment year 2011-12 i.e., from Aug 2010 to Nov 2010. For the remaining period, I was not working. I am staying in a rented house for all these period. Please let me know if I can claim HRA exemption for entire year or only for the period I had worked for...
ReplyDeleteFor Sri :HRA exemption is allowed for the period you have worked.to calculate HRA exemption Rent paid /HRA received/ SALARY must be taken for same period
ReplyDeletemy monthly salary is pay 15270 +gp 4200+da 9930+HRA974total 30374 but i have paid house rant Rs 5500PM and Annualy p tax RS 2500. Can i get any relief Income tax and what is my monthly/annualy IT as it a rural area p.c palei ID-purnapalei.palei616@gmail.com
ReplyDeleteDear Purna
ReplyDeleteyes, You can claim hra exemption fully 974 rs per month. as your rent paid minus 10% of salary is more than hra received .
Hello sir,
ReplyDeleteThis is sai, My Basic is 17509/- per month. HRA 8754/-, DA is 17068/-. I am staying in Non-Metro city and paying 12000/- rent per month. Can you Please let me know, How much HRA exemption i can get?
dear sai b as the da is changeable half yearly so you should calculate monthly basic.
ReplyDeleteto calculate exemption check least of this
1. rent paid minus 10% of (basic +da)
2. Hra received
calculate monthly basis and then add 12 month least value.if figures remain same for complete year then ur calculation is given as under
1.12000-(10%(17509+17068+grade pay if any))=12000-3458=8542
2 8754
exempted hra is 8542 monthly
Hi, For me the least calculated HRA is of the HRA Paid through salary. In that case do i need to submit the rent receipts???
ReplyDeleteMy HRA is 7500.The house i have rented iS in different city where my family is staying n i am on move always with this job.Can i be exempted for hra...please advise
ReplyDeleteDear Kaiser ,
ReplyDeleteYou can not claim rent for family members ,
Dear Orem Nambi,
ReplyDeleteYour query is not clear to me . ask in detail
hello sir, this is tarun.4 of frnds live together and pay 10,000.How much shud i show as rent paid 10,000 or 2500 ??
ReplyDeleteDear Tarun,
ReplyDeleteIf you want to claim HRA then show rent payment quarterly by each friend @ 10000 pm instead of 2500 per month by each friend
iam leaving in my own house and for which iam claiming housing loan interest exemption u/s 24(b).I am receiving a monthly HRA of 480 per month,am i eligible for claiming HRA exemption?
ReplyDeleteproperty self occupied,claiming hsg loan interest,is hra exempt in any way,my monthly hra is 480
ReplyDeleteHi, I stay in thane city, Maharastra. Can I claim the benefit of metro city?
ReplyDeleteThane is not covered in metro city
ReplyDeleteSir, should I produce Rent Slips to get exemption? Is there any limit for not to produce rent payment proof to the employer?
ReplyDeleteProduction of Rent slip exemption to DDO(employer) is available to employees who are receiving House rent up to 3000 Rs monthly
ReplyDeleteI AM RECEIVING RS. 3200 PER MONTH AS HRA. CAN I CLAIM REBATE FOR RS 3000 WITHOUT PRODUCING BILL? THE BALANCE RS 200 WILL BE TAKEN FOR TAXATION. RAJAN
ReplyDeleteNo you can not claim HRA exemption without producing rent receipt ,as HRA received per month is exceeding 3000/-
ReplyDeletewhat is the minimum limit to claim HRA exemption without producing rent receipt.
Deletei am living in TUTICORIN (TN) and getting Rs.710/month as HRA. i didn't produce any rent receipt to office. whether they deduct tax for HRA paid to me???
DeleteDear Siva,
DeleteThere is no need to produce rent receipt where hra received per month is 3000 Rs
Hi thanks for the post...It cleared a no. of doubts..But still have a doubt..
ReplyDeleteBasic for the whole year = 130800
HRA paid = 52320
Rent paid = 6500*12= 78000
According to the calculations, HRA exempted would be 52320, but it is 50620 and the difference 1700 has been added to my net taxable income. Can you help me understand where does this figure come in from?
DEAR Priyanka ,
Deleteask query with complete details ,how you come up with figure 52320
miss priyanka what is ur DA,CDA and GP?
ReplyDeleteHRA Exemption= Rent paid -10% of (BASIC+DA+CDA+GP)
hello sir, i am working in a bank as an officer( basic =Rs16300/-), i am staying in hostel in mangalore and working . i dont have a own house here in mangalore. we have an option called reimbursement of monthly rent payable on approved residential quarters ( in which bank will be paying the rentals of the quarters on behalf of officers up to 4800Rs ) only if we opt to take a house on rent. but instead i opted to stay in hostel (for which i am paying Rs 4000/- including accomodation +food) so because of which i receive a net pay of 6.5% of basic pay as HRA(i.e. Rs1060) . the hostel is registered and it is in leased premises. can i claim HRA exemption for the amount i receive as HRA in salary? my ddo is not accepting any exemption stating that you have to take a house only to claim the HRA under exemption. i am totally confused. pls guide me. whether it is possible to claim IT exemption even if our ddo doesnt accept it and show it under form 16?
ReplyDeleteDear raghuveer ,
DeleteYou can claim HRA exemption. In your case you are receiving hRA and further you are also paying rent so you can claim HRA exemption . However while calculating the HRA exemption you have to reduce food charges from the total payment made to hostel .Further while calculating 10 % of salary you have to include DA also.
suppose food charges are 1500 in 4000 and da rate is 50 % then calculation will be as under.
least of the following is exempted.
1. HRA Received=1060
2.Rent paid in excess of 10% of salary (10% of (16300+8150)50% da =4000-1500-2445=55Rs
3 40% of salary 9780
least is 55 Rs only per month . Further if have to make exact calculations
I think ur calculation is wrong, 2nd point that Rent Paid in excess of 10% basic=4000-0.1*16300
DeleteSudarshan
Sir,
ReplyDeleteI am a govt. officer staying in delhi and paid Rs. 14000/- per month to his wife,House is her name pl confirm me can i get the HRA Rebate from my office under which section
thnks
Naveen Varshney
If house is purchased/construct by your wife by your funds then you can not pay rent to your wife. If he owned house from their own resources then you can pay rent to her and can claim HRA exemption
DeleteShall Vashi (Navi Mumbai) be cosidered as Metro/ Non-Metro for HRA Deduction? I think just like New Delhi, even it shall be considered as a Metro City. Request professionals to comment.
ReplyDeleteif navi mumbai i covered under municipal limit of Bombay then you can treat it metro
DeleteWe 3 persons are staying in a house and paying a rent of 4500 per month. 2 of us are working in same company. How much can we show as rent paid for each person.
ReplyDeleteplease send your salary details as well like Basic ,DA, HRA per month
Deletemy basic salary is 12000, there is no DA nad HRA is around 5000. Who will check the tax for HRA amount, I mean how the govt checks whether the owner is paying the tax for the rent given by the rented persons.
DeleteNo one can check ,if you want to take risk then you can .
DeleteHi my basic salary is 10985
ReplyDeleteI live in noida and pay 6000 per month
How much House rent can i exempt.
you have not given the amount of HRA received and amount of DA
DeleteHRA 6591 no DA
DeleteExemption calculation is under .
Deleteleast of following exempted
1. hra received =6591
2. 40% of salary =4400(appox)
2. rent paid in excess of 10% of salary =6000-1098=4898
least of above is 4400 exempted .
My bank is deducting TDS on my bank F.D. interest. I have filed form 15 G at the starting of this financial year. My FD interest Is around Rs.220000/-. Can the bank deduct TDS after receiving form 15G?
ReplyDelete15G form can only be given if gross total income is less than exemption limit ,as your fd interest is more than exemption limit ,bank can deduct tax even after submission of the form 15G
DeleteHai My basic is 35000 and just finished my housing loan. I was taking benefit from Interest paid for H/L. Now can I opt for HRA exemption. HRA is 50% of basic
ReplyDeleteYou can claim HRA exemption if you are residing in rented house and paying the rent .
DeleteHai My Basic salary is 34330 and HRA is 20598 per month. I am staying in Viajayawada and paying Rs 15000 per month as rent . I have not claimed HRA to my company and company has issued form 16 without considering my HRA . Can i claim HRA while submitting the Income tax returns ,If so pls let me know the procedure for the same. Thx
ReplyDeleteCan any body reply to the above querry
ReplyDeleteMy father has taken a house on rent and has sublet to me on rent. Rent receipt is issued by landlord on my fathers name who is retired govt personal. My query
ReplyDelete1. Can I claim HRA by taking rent receipt from my father and pay my father by cheque.
2. Money received in fathers hand is taxable or not as he has paid the same amount to the original landowner.
Pleas reply ASAP.
Even, I have submitted Rental Agreement, Rent Receipts, DOB of my Landlord (for senior citizen) and Address Proof. However, my HRA is exceeding 180k and my House owner is not having a Pan Card, I submitted Form 60. In our company, our Tax consultants/Auditor they are not considering Form 60 and due to not availability of Pan Card they deducted Tax with minimum HRA (may be around 15 or 17.5 k for senior citizen and i am not sure, how much they considered).
ReplyDeleteIs there any provision to apply actual HRA during my Tax Filing?
Thank you.
The good news is that you can apply actual HRA exemption available to you at the time of return filing .This is also written in instruction of Income Tax form
DeleteMany Thanks, Rajan Gupta, let me try that during the time of return filing.
Deletewhat the hell is this finalised by IT department, its just peenuts even a person not getting exemption on actual HRA paid to landlord. stuidness we are paying tax and gov. of india is wasting this money on Air India. whole bulshit.
ReplyDeleteDear Raja Babu Sir,
ReplyDeleteFrom March 2012 my salary hiked 5,00,000 p.a. I'm paying LIC 22,000 p.a. My house rent is 7300 per month. So how much salary i will get on monthly. Please clarify me.
pls ask in details
DeleteDear Raja Babu Sir,
ReplyDeleteFrom March 2012 my salary hiked 5,00,000 p.a. I'm paying LIC 22,000 p.a. My house rent is 7300 per month. After tax deductions I'm getting 39800 per month. Shall i increase my monthly salary to more than 39800 per month.
Hi Raja Babu,
ReplyDeleteI have worked for two companies in FY-2011-12. April, May in one co. and rest of the FY in another Co. Now the First Co. hasn't included HRA in the exemption. They have only deducted Professional Tax.
Please let me know if/how could I claim HRA for the first two months of the year.
Thanks,
Srinivas
Yes , you can claim hra exemption while filing your income tax return .
DeleteKindly tell me what criteria should be followed by hostel (in terms of facilities) so that the students residing in hostel wouldn't be able to claim their HRA from fellowship.
ReplyDeleteIn fellowship payment HRA component must be shown as payment .
DeleteHi Raja Babu
DeleteI am working in an IT company earning an basic of Rs.25K and HRA of Rs.12.5K and I am staying in a hostel in Hyderabad 6500/- per month. Can I claim the HRA exemption and how can I do that.
Least of Three is exempted
Delete1. rent paid in excess of 10 % of salary=6500-2500=4000
2 Hra Received =12500
3 40 % of salary=10000
so 4000 month is exempted from total HRA.
To claim this benefit you have arrange a rent receipt from hostel
Hi Raja,
ReplyDeleteI am working in a consulting firm. I receive HRA from my company. I had not declared any rent amount to my employer at the beginning. Therefore, Company has deducted only rent paid my me for the last quarter. However, I had submitted rent receipts for the whole year at the end of the last quarter. Now, I am filing tax returns using ITR-1. Is it now possible to get exemption on the rent paid by me? If yes, where should I fill the actual exemption values.
Thanks!
Yes you can claim exemption now. In itr-1 ,sr no -1,you should fill value of salary at sr number one after adjustment (reduction) of hra exemption amount.
Deletehi . my employer has not provided me correct form 16 .they have not included my hra . now how should i claim the same . if i claim it now should i show any recipts or submit any bill if my rent is less than 3000
ReplyDeleteYou can claim HRA exemption while filing income tax return . Nothing is to be attached with ITR form . However ITO may call for details if your case comes under scrutiny
DeleteHi,
ReplyDeleteI need your urgent help.
I was staying in company accommodation till nov and shifted to my rented house after marriage from nov to march. but my company only added salary component in my salary from jan .. however from nov till dec i was paying rent. how can i claim benefit of HRA exemption for nov and dec
If no hra has been paid then no deduction can be claimed
DeleteHi,
ReplyDeleteI want to know that my company is not providing HRA to me, but I am paying the House rent myself. I want to know that, is there any exemption in ITR for that. my basic salary for the year was 167100. how much refund I could get. there is no amount shown as HRA or value of prequisites as per section12(2).
Yes , you avail deduction u/s 80GG subject to few conditions
Deletehttp://www.simpletaxindia.net/2009/01/hra-exemption-to-pensioners-meaning-of.html
hi, this is shashi. pls let me know about, if i did not taken hra exemption from my company also not provided rent receipts. now i am filling online itr so, under which head/section i can claim the calculated hra amount.
ReplyDeleteFirst calculate your HRA exemption , the deduct it from salary Income shown on the form 16 and fill net figure after deduction in ITR-1 sr number 1
Deletehi, this is mahesh, can u tell me what is the extra exempt limit as: (Insurance Policy, Children fees & Medical claim etc. if any)
ReplyDeleteOver all limit is one lakh for all three.
DeleteHi, I need your help on this.
ReplyDeletePlease guide.
Basic Salary - 12,484/m
HRA - 6241/m
Actual Rent - 14,000/m
Staying in Panvel, Navi Mumbai.
How much HRA I can claim.
HRA Exempted :Least of three will be exempted
Delete(1.) HRA Received 6241
(2.) Rent paid in excess of 10 % of salary 12751.6
(3.)40% /50 % of salary 6242
Hra exempted per month is 6241
Annual exemption 74892
Hi Raja,
ReplyDeleteI couldn't produce HRA proof before, hence my form 16 doesn't reflect the HRA exemption. Can I still claim refund for the HRA exemption by filling ITR if yes then how can I do that? I am using Taxspanner site for filling my ITR.
you can avail hra benefit by deducting HRA exemption from salary amount shown at sr no -1 in itr-1
Deletei have deducted HRA amnt from sr no -2 in itr1 is it acceptable
ReplyDeleteIt is incorrect 101% read details here
Deletehttp://www.simpletaxindia.net/2012/07/e-filing-income-tax-return-common.html
i have a loan so interest component i will fill in sr no -2 also i have to claim hra as i am staying in a rented house.this hra amount i should deduct from sr no 1 or add to sr no -2.Kindly help
ReplyDeletehra exemption should be deduct from sr number 1
DeleteDear Sir,
ReplyDeleteI work in a hospital and stay in hospital-alloted quarters. I get HRA of 3500 per month and hospital deducts 6000 per month as part of rent for the accomodation.
My wife also works in the same hospital and gets HRA of 3000 per month but does'nt have to pay any rent as she stays with me. Can she claim HRA exemption?
if you are working in not govt office then No issue .Company can make their own rules for payment .
DeleteHi
ReplyDeleteI work in Gurgaon and pay rent for a rented accomodation for my parents in Ambala. Can that be claimed in HRA as Ambala is 250 KM far from Noida
Thanks,
Tarun
No , you can not .HRA exemption can be claimed for rented house in which employee himself is residing
DeleteHi
ReplyDeleteMy basic is 9300-4200-13500.
D.A.-9720
HRA-1350
Total sallary-25470.
I pay 3500 rent per mnth in non metro area.
Can i get hra exemption?
BP 21110 DA=18999 HRA=6333 TA=2752 RENT PAY =8500PM IN DELHIPL DEFINE HRA EXEMPTION 2012-2013 G.S YADAV
ReplyDeleteSIR MY BASIC 6500
ReplyDeleteHRA 46750
OTHER ALLOWANCE 46750
LIVING IN COIMBATORE
HOW TO CALCULATE HRA
The house is own by wife , which she constructed with her own funds. I am staying in this house and paying monthly rent to her by cheque and obtain rent receicpt also. Can I clain HRA benefit in my IT calculations. She also declares her rent income in her IT retrn.
ReplyDeleteyes , you can claim .
DeleteIs it mandatory that the employee should be paid 10% of his basic salary to rent and should not that be tax exempted?
ReplyDeleteFor example A is an employee
A had basic salary 20000
A had HRA allowance from company is 8000 (non metro city)
Actual rent he is paying also 8000
Total basic per year is 240000
Total HRA recived for year is 96000
Total Rent paid for year is 96000
But because of 10% excess from basic rule, he can claim tax exemption as (96000-24000)= 72000, even though he is paying rent of 96000 per year. So is true that one person suppose to spend 10 % basic salary to RENT and should not claim exemption for it?
rule is rule.
DeleteHRA rent with parents? can i exa.?
ReplyDeleteI was staying in city A in rented accomodation till nov. moved to another rented accomodation at city A. But stay at city A for 2- 3 days & city B for 2-3 days in a week also on rent. Thus can i claim for exemption, rent paid till nov in City A and DEc till march at City B only.
ReplyDeleteI have a house jointly owned by father and me and home loan too....
ReplyDeleteSo in this case how can i claim HRA..
Please help me...
Sir,
ReplyDeleteI am working in an Government organisation on contract basis with a consolidated pay of Rs. 20000 per month. I am paying Rs.2500 as rent per month. Can i claim the same amount as HRA exception per month.
Ratheesh, Trivandrum
Hi Sir
ReplyDeletePlease find my salary structure and suggest me how much amount i can claim for Rent
BASIC 8000
HRA 10000
I am living in Navi Mumbai and paying rent 11500/M, please suggest
you will get least of following exempted
Delete1.HRa received =10000
2. rent paid in excess of 10 % of salary=11500-(8000 * 10/1000)=10700
3 50 % of salary=4000
Anonymous said...Hi, this is RK, my BAsic is 10,000 and HRA is 9300/Month. What is my Rent exemption for 01/04/2012 ti 31/03/2013
ReplyDeletepls provide rent paid also
DeleteI'm working on a contractual basis under NRHM with a consolidated pay of Rs.40000 pm. I pay Rent Rs.5000 pm. Can I claim HRA and if then how much?
ReplyDeleteplz reply
working in pvt co. my Basic is Rs.128688/- pa and da is Rs.3672/- pa HRA is Rs.84216/- pa. how much exemption can i claim?
ReplyDeletepls provide details of rent paid
DeleteI am being paid a consolidated pay of Rs 125000. No details of HRA or other is shown in payslip. I pay Rent of 17500 pm. I have rent receipts from the land lord. However, office has stated that as HRA is not shown in the pay slip, they cannot provide deduction for the same, but I can claim deduction when filing IT return. Kindly advise.
ReplyDeleteif no break up i provided you can not claim hRA exemption ,however you can claim deduction u/s 80GG subject to some condition,check details here
DeleteMaximum deduction 2000 per month
http://www.simpletaxindia.net/2009/01/hra-exemption-to-pensioners-meaning-of.html
Hi
ReplyDeleteHow much exemption can i get under HRA
my Basic is 3100
HRA 800 and DA 12100. I pay the rent of 12000 pm.in non metro state.
Hra will be fully exempted i.e 800 per month
DeleteI was receiving Rs.13750 as stipend(without any D.A./ basic Pay/HRA being mentioned) during my post graduate course from April to August 2012.
ReplyDeleteSubsequently in my first company I was paid a HRA of 7500 for September, October and November With a Basic Pay of Rs.15000.
From December 2012 to March 2013 my HRA was Rs. 1600 per month with a consolidated pay of Rs. 115600 (No separate Basic/ D.A. mentioned in Pay Slip).
I was residing in a Metro city throughout the said period paying a rent of Rs. 10,000 per month.
How should I calculate my HRA.