HRA and Tax Benefits

April 24, 2009

Income Tax

In this article I will be explaining about the tax declaration for House Rent Allowance(HRA). If you are employed in any company you would have got request from your employer to update the Tax Planning and Declaration for 2009 – 2010. Then you can declare tax savings on Section 80c for Rs.10000 and home loans if you have taken one, insurance premium, medical insurance policy or savings on Fixed Deposit, PPF. etc. Apart from all these investments and savings, Income Tax act 1961 has the provision for declare the HRA paid by your employer for tax savings. The amount you can claim as the HRA exemption is under rules and calculation given by the section 10 (13A). This article explores more details into that section and will explain you how much you are eligible to declare under the HRA. I would like to answer all you queries in the comments section. If you like the article please subscribe for our future articles here.

HRA and Tax Benefits

Every one who are receiving the HRA benefits from their employer is eligible to declare the HRA as the tax savings. Note that, if you are staying in the rental house then only it is applicable. If you are reside in your own house, then you will not be eligible to claim the tax benefits for HRA paid by your employer. The details about the HRA exemption in described under Section 10 (13A) of the Income Tax act 1961. The following are the three conditions to eligible for HRA exemption:

  1. HRA must be included in your salary component
  2. You are staying in the rented house
  3. Your rent is more than 10% of your salary

HRA Limit for Tax Exemption

There is certain provisions to calculate the HRA amount you are eligible to claim as the tax benefits. Use the following three conditions to calculate the HRA and least of the following three can be claimed as the tax ememption:

  1. The amount received as HRA from the employer
  2. 40% of salary. It is 50% of salary if you are staying in any of the four cities: Delhi, Mumbai, Chennai or Kolkata.
  3. Rent paid minus 10% of salary

For example, if your salary is Rs. 11000 (here salary is basic component in the gross salary). Your rent paid is Rs.6000. HRA component in the salary is Rs.4500 and you live in Bangalore city. Apply the above rules as follows

  1. HRA received : 4500
  2. 40% of salary : 4400
  3. Rent paid minus 10% of salary : Rs.6000 – Rs.1100 = Ra.4900

In the above scenario, you are eligible for the amount of Rs.4400 as the HRA deduction from your taxable income. I hope this example clears your doubt on HRA calculation.

Summary

In this article I have explained about the HRA exemption and the calculation on how to find the eligible amount for the HRA exemption. It is important to know HRA Tax Benefitsthe exact amount you are eligible as the HRA deduction because it will help you to calculate the tax savings effectively. Don’t waste your time, hurry up and submit your Tax Planning for 2009. In my next article I will be writing about the rules to keep i mind while applying for the HRA deductions. There are some interesting facts to consider before applying for HRA. Wait for the next article. Thank you for reading this article!!. If you have any doubts please post it in the comments section.

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164 Responses to “HRA and Tax Benefits”

  1. kameswari Says:

    hi,

    I stay in a girls hostel paying 4300/month in Bangalore, can my hostel rent receipts be used for tax benefit.

    Reply

  2. kuntal Says:

    hi,
    my basic salary Rs. 4,80,000/- (p.a) & HRA receive Rs.2,88,000/-, Rent paid Rs 2,16,000/- as per IT rules the exemption of HRA Rs. 1,68,000/-. My question is that U/s 10(13a) the exemption will be Rs 168000/-
    Is this is right calculation or any maximum limit for hra exemption is there.

    Pl reply soon

    thanks

    Reply

  3. G.Nisar Ahmed Says:

    Hi,

    I am a govt. teacher and wife also teacher in the same district doing service in different mandal. Whether we both husband and wife can claim the HRA exemption for the same door number in which we are leaving together. Kindly reply to this query urgently along with IT sections to my email address.

    Thanking you,

    G.Nisar Ahmed

    Reply

  4. umesh Says:

    Sir

    I m a govt emplyee. I am living in ahouse taken on lease rent. I do not get HRA but get LEASE RENT every month. Sir I will compute m total income in regard to not getting HRA and getting lease rent

    Regards

    Reply

    • sanjay Kumar Mall Says:

      my basic salary Rs. 604272/-(p.a) & HRA receive Rs.37416(Annual)-, Rent paid Rs 120000/-(annual) and Living in unclssifid City
      Please calculate the income tax for hra exemption.

      Reply

  5. rekha Says:

    i get 2499rs.as hra . i live with my husbandin our own house. can i have hra examption. will i have to submit rent reciept. can i show rented house in any other location.

    Reply

  6. Sampath Says:

    Sir,

    I am Staying in my wife’s house. My wife is housewife and not working anywhere. she take tutions for kids earn just 2ooo Rs. I am getting HRA. I am paying rent to my wife as I am staying in the house on rent with kids. Can I get HRA exemption from total income or is it taxable? if exemption is there kindly inform the section under tax law please.

    Reply

  7. subrahmanyam Says:

    Iam a Govt employe in AP,I got Pay of Rs.16150/month , HRA is 1938/month.Can I get the HRA exemption from IT.Iam living in Visakhapatnam rented House rent is 4000/- per month.

    Reply

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