What is HRA ?

 
  • Income tax act provides deduction of HRA under section 10(13 A)
  • HRA is an exemption, ie. the part of your salary which is nontaxable provided you fulfill all conditions.
  • HRA lets you reduce your taxable income, which in essence would mean less taxes to pay
  • Simultaneous deduction of HRA, home loan interest (Section 24b) and housing loan repayment (Section 80C) is permitted.
  • An employee can claim HRA benefits even if he owns a house/property, and lives in a rented property.

How to calculate HRA

If you are staying in a rented house and receive HRA from your employer then you can avail this exemption. However to avail this exemption you actually need to be paying rent for the house. So if you are staying in your own house and are not renting it; then the HRA you receive is not exempted and is subject to tax.

 

For instance if you are staying in Delhi (metro); your basic salary is 10,000/-; and you are paying rent of 5000/- per month.The House Rent Allowance is 5000 per month.The exemption you receive will be the minimum of the following three options:

 
Rules Eligibility amount (in rupees)
Actual house rent allowance received from your employer in 12 months 60,000 (12*5,000)
Actual house rent paid by you minus 10% of your basic salary 48,000 (60,000 – 12,000 [10% of 1,20,000])
50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non metro 60,000 (50% of 10,000*12)
 

In this case you will get exemption on 48,000/- per year on HRA; even though the HRA you are receiving is 60,000. If your rent was higher; say 72,000/- per year; then you would be eligible to get 60, 000 as exemption which is the same as your HRA.

 

Frequently asked questions

Can I get tax rebate if I am staying in my own house?
No, you cannot claim HRA Exemption in this case.
I have a house in Delhi; but am staying on rent in Bhopal?
Yes, you can claim HRA.
My house is under construction & I have taken another accommodation on rent in the same city?
Yes, you can claim HRA.
Can I get both HRA tax exemption and tax rebate on my home loan?
Yes, you can; where you have rented a house (for yourself) even though you have your own home, for which you are paying a home loan through EMIs. In this case you have to prove that your house (for which you are paying home loan) is far away from your work place.
ICICI Pru LifeTime Classic (UIN: 105L155V01)
Unlike traditional products, Unit Linked insurance products are subject to market risk, which affect the Net Asset Values & the customer shall be responsible for his/her decision. The names of the Company, Product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns.
Tax deductions are subject to conditions of section 10(13A), 24(b), 80C, 80GG and other provisions of The Income Tax Act, 1961. Tax laws are subject to amendments from time to time. Please consult your tax advisor for details.
*Tax Benefit of 46,350 is calculated at the highest tax slab rate of 30.90% on premium of 1,50,000 under section 80C of income Tax Act, 1961.
Advt No - W/II/1263/2016-17
 
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