When you receives salary slip, you can see one column showing HRA amount. Full form of HRA is house rent allowance. You can claim HRA exemption and save income tax on HRA received.
Know HRA exemption calculation with examples u/s 10 (13A):
Before I start, let’s see what you will learn from this post:
- HRA rules knowledge
- HRA calculation with 3 simple examples when there is change in salary, place or rent received.
- Proof to be produced while claiming HRA exemption.
- Other important facts with regards to HRA rules.
HRA is the amount received by employee to pay the house rent. This amount can be monthly or annual. This amount is taxable in salary head of income tax. To save tax on HRA received, you need to calim HRA exemption u/s 10 (13A).
- HRA received.
- Rent paid less 10% of the salary for relevant period.
- 50% of the salary if residential house is situated in Metro city – Mumbai, Chennai, Kolkatta and Delhi or 40% of salary for other places.
Salary for this purpose means basic salary, dearness allowance if terms of employment so provides, commission based on fixed percentage of turnover.
Important factors to be considered while claiming HRA tax exemption u/s 10 (13A):
- Place of residence
- Rent paid
HRA exemption computation :
Change in above factor has impact on HRA tax exemption. That’s why I have given three examples to explain how to calculate house rent allowance exemption.
Manoj receives salary for the year 2014-15. He resides at Rajkot.The data for salary is given below:
Amount (annual data)
DA ( included as per terms of employment)
House rent allowance (HRA)
24,000 (2,000 P.M.)
Rent paid during the year
| 36,000 (3,000 P.M.)|
Calculation of HRA exemption :
Salary for the purpose of HRA exemption calculation
|Basic salary|| 2,00,000|
|Dearness allowance|| 1,00,000|
|10% of salary|| 30,000|
|40% of salary|| 1,20,000|
|Actual HRA received||24,000|
|Rent paid Less 10% of salary||36,000 – 30,000 = 6,000|
|40% of salary||1,20,000|
|Available exemption (lease of the above)||6,000|
Exemption calculation when there is change in salary, location of job or employer.
Example 2 (Change in salary ) :
Salary details of Mr. John who is working at Porbandar for the year 2014-15 :
|Basic salary||60,000 (20,000*3)||2,25,000 ( 25,000*9)|
|Dearness allowance||30,000 (10,000*3)||1.08,000 (12,000*9)|
|HRA received||6,000 (2,000*3)|| 27,000 (3000*9)|
|Rent paid||9,000 (3,000*3)|| 27,0000(3,000*9)|
Salary for the purpose of HRA exemption calculation:
|Particulars||First 3 months||Remaining 9 months|
|10% of salary|| 9,000|| 33,300|
|40% of salary||36,000||1,33,200|
Exemption u/s 10 (13A) as per HRA rules :
|Particulars||3 months||9 months|
|Actual HRA received||6,000||27,000|
|Rent paid less 10% of salary||0 (9,000-9,000)||0 (27,000-33,300)|
|40% of salary||36,000||1,33,200|
|Exemption allowed (least of the above)||0||0|
|Taxable House rent allowance||6,000||27,000|
Example 3 (Change in job place and rent):
Following are details of salary of Mr. Pratik who is working with Zed Ltd. Mr. Pratik was trasferred from Jamnagar to Mumbai at 1/1/15. There is no change in salary of Mr. Pratik during the year.But there is change in rent paid.
|Particulars||1/4/14 –31/12/14||1/1/15 –31/3/15|
|Basic salary||2,25,000 (25,000*9)||75,000 (25,000*3)|
Salary calculation for the purpose of HRA exemption computation
|Particulars||9 months||3 months|
|Total for the purpose of Exemption computation||3,15,000||1,05,000|
|10% of salary||31,500||10,500|
|40% of salary for non metro city||1,26,000|
|50% of salary for metro city||52,500|
House Rent Allowance exemption available:
|Particulars||First 9 Months||Remaining 3 Months|
|Actual HRA received||18,000||6,000|
|Rent paid less 10% of salary||4,500 = 36,000 – 31,500||4,500=15,000-10,500|
|40%/50% of salary as per residential house location||1,26,000||52,500|
|HRA exemption – least of the above||4,500||4,500|
|Taxable HRA = Actual HRA received – HRA exemption||13,500||1,500|
Other important points:
- Proof to be produced to claim HRA: Produce receipt of rent paid to employer for TDS purpose. However, as per circular no. 8/ 2013.(page 25), receipt of rent is not mandatory when rent claim is less than Rs. 3000 for TDS purpose.Receipt should indicate place of residence, name of landlord, signature of landlord, rent paid details. Affix one rupee revenue stamp on receipt when rent paid is more than Rs. 5000 and get signature of landlord across it. If rent paid is more than Rs. 1 lakh, get PAN card no. of landlord as per circular no. 8/2013. If pan card is not available, give self declaration from landlord indicating name, address, rent paid details.
- House rent accommodation and rent free accommodation are different things. Rent free accommodation is residential space given by employer to employee without or with partial rent. Rent free accommodation is perquisites u/s . Rent free accommodation is non monetary benefit and HRA is monetary benefit. Both are covered under salary head.
- Self employed person cannot avail HRA exemption benefit. But he can avail deduction u/s 80GG for rent paid during the year if he has not owned house.
- You can pay rent to your parents and claim it for HRA exemption. The parents should show the rent amount as income for income tax purpose. But you cannot claim HRA for rent paid to spouse.
- You can avail home loan interest and principal exemption simultaneously with HRA exemption.
HRA tax exemption saves your income tax and increases monthly salary. Use HRA rules mentioned above next time. If you have any query with regards to HRA exemption calculation, feel free to ask me through comments. Share this article on social media to encourage me to write more.