Income tax and HRA
-
10 Comments
House Rent Allowance (HRA) is an allowance given by an employer to an employee. The sole purpose of which is to meet the cost of renting a home. Here, we hope to clear the concepts of HRA and how the income tax exemption on HRA is calculated.
You can claim HRA if you fulfil the following three conditions:1. HRA allowance should be a part of your salary package.
2. You are staying in a rented accommodation and paying rent for it.
3. The rent exceeds 10 per cent of your salary (basic + DA).
Tax treatment of HRA is a bit complicated and there are three figures that need to be computed:
- Actual HRA received
- Amount by which rent paid exceeds 1/10th of salary (basic + DA)
- 50% of the salary (basic + DA) if located in Metros like Mumbai, Delhi, Kolkata or Chennai and 40% of salary if located elsewhere.
The lowest of the above three amounts is allowed as a deduction from the HRA received and the rest is considered taxable. Let’s try and understand this through the following example:
Ram lived in Mumbai and paid a rent of Rs 10,000 p.m. His basic salary was Rs 25,000 and daily allowance Rs 3,000 p.m. He received an HRA from his employer of Rs 8,000 p.m. The 3 figures that need to compute his HRA tax liability are:1. Actual HRA received = Rs 8,000
2. Amount by which rent paid exceeds 1/10th of salary = Rs 10,000 – (10% of Rs 25,000+ Rs 3,000) = Rs 7,200
3. 50% of his salary (Rs 25,000 + Rs 3,000) = Rs 14,000
The lowest among the 3 figures (Rs 7,200) will be allowed as a deduction and the rest (Rs. 800) will be taxable.
For more information on Tax rates, Tax exemptions and various other Tax Tips and Guides, visit our Income Tax Learning Centre
No related posts.
Published on February 23, 2009 · Filed under: Income Tax, Personal Finance, Popular; Tagged as: House Rent Allowance, HRA, HRA Exemption, Income Tax, Income Tax Exemptions
10 Responses to “Income tax and HRA”
-
chirag said on February 26th, 2009 at 4:49 am
its really help me to calculate my HRA.
-
Aslam said on March 2nd, 2009 at 5:06 am
I get beneficial for my Tax saving
-
sumit said on March 2nd, 2009 at 8:47 am
good information
-
Komal said on March 5th, 2009 at 5:03 am
How to Calculate the Income Tax Exemption on House Rent Allowance (HRA)?
-
anjali said on March 5th, 2009 at 5:23 am
good calculation
-
shafi ahmad said on March 5th, 2009 at 5:25 am
Thanks for easy HRA calculation.
-
Rohit said on June 4th, 2009 at 6:26 am
good website,
this site complete will all finance product for a middle class person.
and guide line and learning center is also good.
it seems the management and content team are very good.Thanks.
regards.
Rohit. -
harsh roongta said on September 16th, 2009 at 6:46 pm
good……………..
-
YRA MURTHY said on November 28th, 2009 at 11:12 am
Sir, Thanks, usefull information, but i have doubt, please clarify
Is bangalore (A1) city is eligible for 50% HRA or 40% HRA
please sir
-
Neeraj Kumar Gupta said on January 13th, 2010 at 10:46 pm
pls about H R A in Ambala HARYANA
Leave a Reply
|
||