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How to calculate House Rent Allowance (HRA) Exemption

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Introduction-
House Rent Allowance exemption under section 10(13A) is allowed if Salaried individuals getting House Rent Allowance  as part of salary and full fill below two conditions:
  1. He has taken a residential accommodation in which he resides on rent.
  2. He has not occupied such property in which he resides.


If  you don’t live in a rented accommodation. You live with your parents in their house. In that case also, you can claim HRA. However there should be a rent agreement, and parents must show this rental income in their Income Tax Return.
 
How to calculate HRA : Use HRA exemption calculator-
 

HRA Exemption can be claimed whichever is least on the following basis:-

  • Actual HRA Received
  • Rent paid minus 10% of Salary
  • 40% of salary if he resides in Non Metro City or 50% of salary if resides in Metro City.

If rent paid during the financial year exceeds Rs.1,00,000, PAN of landlord is necessary.

 

For Example

Mr. Sumit employed in Chandigarh.
He has paid a rent to Mr. X of Rs 1,44,000 during the financial year 2017-18.
His basic salary is Rs. 3,60,000 and House Rent Allowance received of Rs 1,80,000.
What is exemption of HRA?
Solution:

Mr. Sumit can claim HRA exemption as below(whichever is the least)

* SALARY means BASIC SALARY + D.A.(if any)
1. Actual HRA Received 1,80,000
2. Rent Paid minus 10% of Salary i.e. 1,44,000-(10% of 3,60,000) 1,08,000
3. 40% of Salary because he is living Non Metro City 1,44,000

So, Mr. Sumit is eligible for HRA Exemption under section 10(13A) of Rs. 1,08,000 in the financial year 2017-18 and Rs. 72,000 i.e.(1,80,000-1,08,000) is taxable


See the related post : How to E-file Income Tax Return



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