Provisions for Calculating House Rent Allowance (HRA)
House Rent Allowance (HRA) is a common component in the salary of employees and is given by employers to help employees meet their rental expenses. Under Section 10(13A) of the Income Tax Act, a portion of HRA can be exempt from tax if certain conditions are met.
Conditions for Claiming HRA Exemption
- The employee must live in a rented house.
- Rent must actually be paid.
- Employee should not own the house in which they are living.
Amount of HRA Exemption
The least of the following three amounts is exempt from tax:
- Actual HRA received
- Rent paid minus 10% of salary (Basic + DA for retirement benefits)
- 50% of salary if living in metro cities (Delhi, Mumbai, Chennai, Kolkata) or 40% for non-metros
Example:
Mr. A lives in Delhi, earns a basic salary of ₹30,000 per month, gets HRA of ₹15,000 per month, and pays rent of ₹20,000 per month.
- Actual HRA received = ₹15,000
- Rent paid – 10% of salary = ₹20,000 – ₹3,000 = ₹17,000
- 50% of salary = ₹15,000
Exempt HRA = Least of above = ₹15,000
Documents Required
- Rent receipts
- Landlord’s PAN (if rent exceeds ₹1,00,000 per year)
Conclusion
HRA exemption helps salaried individuals reduce their tax liability. Proper calculation and documentation ensure smooth claim during tax filing and assessment.