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:
- HRA must be included in your salary component
- You are staying in the rented house
- 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:
- The amount received as HRA from the employer
- 40% of salary. It is 50% of salary if you are staying in any of the four cities: Delhi, Mumbai, Chennai or Kolkata.
- 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
- HRA received : 4500
- 40% of salary : 4400
- 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.
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 the 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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