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HRA exemption calculation with examples

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:

  1. HRA rules knowledge
  2. HRA calculation with 3 simple examples when there is change in salary, place or rent received.
  3. Proof to be produced while claiming HRA exemption.
  4. 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).

  1. HRA received.
  2. Rent paid less 10% of the salary for relevant period.
  3. 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):

  1. Salary
  2. Place of residence
  3. Rent paid
  4. Employment

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.

Example 1:

Manoj receives salary for the year 2014-15. He resides at Rajkot.The data for salary is given below:

Particular

Amount (annual data)

Basic

2,00,000

DA ( included as per terms of employment)

1,00,000

Bonus

    50,000

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
Total         3,00,000
10% of salary             30,000
40% of salary          1,20,000
Particular Amount
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
Taxable HRA 18,000

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 :

Particulars 1/4/14-30/6/14 1/7/14- 31/3/15
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)
Bonus 12,000 18,000
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
Basic salary 60,000 2,25,000
DA 30,000 1,08,000
Total 90,000 3,33,000
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)
DA 90,000 (10,000*9) 30,000(10,000*3)
HRA received 18,000(2,000*9) 6,000(2,000*3)
Rent paid 36,000(4,000*9) 15,000(5,000*3)

Salary calculation for the purpose of HRA exemption computation

Particulars 9 months 3 months
Basic salary 2,25,000 75,000
DA 90,000 30,000
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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

20 Comments

  1. By MSK TPT

    Self declaration for Rent payment proforma to submit the employer. What is the limit amount. If the amount is more than the limit the proforma of rent receipt from the owner. Please provide any circular / notification in this regard.

    • By admin

      Declaration is required when PAN is not provided by landlord. In other case, You can show receipt of rent paid. Affix revenue stamp, when rent paid p.m. is more than Rs. 5000.

      See circular from the following link. http://www.incometaxindia.gov.in/communications/circular/910110000000000135.pdf
      (page 25)
      In this circular, it is clearly said that if house rent allowance is less than Rs. 3000 per month, rent receipt production is not necessary for TDS purpose. When HRA exemption claim is more than Rs. 1,00,000, PAN of landlord is required.

      I think it will help you.

  2. By Harshali Jagdale

    I have a doubt, 1 employee pays rent Rs. 11000/- per month. His rent expense is more than Rs. 100000/-. He do not want to reveal PAN no of landlord. So he ask to take rent for 9 month i.e Rs .99000/-. So in HRA exemption calculation we should take 9month salary or 12 months salary. As HRA exemption amount changes with this. Pls guide me in this.

    • By admin

      It is not right way…

  3. By anand

    Mam. I am central govt employees posted at jaipur. I am living in hotel as it is cheaper than a flat. I submitted rent receipt of 60000 annual to my department duly signed by hotel owner but he refuse to give his PAN number on it. My dept did not provide hra exception on this basis that Hotel owner did not provide his PAN number.
    As per information hra claimed less than 100000 annually did not required PAN number.

    Than what to do

    Anand Kumar
    akdmdu@gmail.
    com

    • By admin

      You can file income tax return and claim exemption for HRA in return. Please show HRA exemption as per income tax limit I have shown in example.

  4. By Awaneesh Jha

    A person leave the job in previous employer work done by him say 10 months HRA are also receive and also claim HRA thereafter he join job in new employer for 2 month and he receive HRA but the amount of HRA is not shown the form no 16 because new employer think that the salary is not exceed the maximum taxable limit.can he claim for HRA exemption For 2 Months which Is receive from new employer? plz advice me……..Thanks

    • By admin

      Yes, he can claim HRA exemption for 2 months salary. ( You should have proof for it like salary sleep or amount credited in bank.). You need to do separate calculation for HRA for both the jobs.

  5. By RGN

    I am staying in my own house and my housing loan is over. But the annual maintenance that i did from my money can be shown as some loss on the property

    • By admin

      No, you cannot show.

  6. By Aparna

    I am a salaried person working in Mumbai. My company pays hra of 32500 while I am paying 30000 as rent. From next month I am shifting to a new house where I would be paying 45000. How do I calculate exempt amount? On a monthly basis or yearly basis.

    • By admin

      You need to calculate exemption separate for each month.

  7. By Dhiraj Kapoor

    Mam can a employee having NPS claim some part of amount of compulsory 10% deductions under sec. CCD1 and some in section CCD(1B)

  8. By Ashish Gupta

    I was in a rented accommodation for 10 months in FY and then moved to self-owned house for remaining 2 months. For the HRA exemption, Rent paid is considered on 10 months however not sure whether basic salary can be considered for 12 months or need to be taken only for respective 10 months. Please share your inputs. Note: I’m availing House Loan Interest exemption and Principal paid deduction for 2 months in my self owned house.

    • Ashishji,

      HRA exemption will be least of following

      actual rent paid for 10 months

      Basic Salary for 10 months

      HRA received

      You can avail HRA exemption in spite of housing loan exemption.

      • By Rishabh

        Ma’am I joined my company, fresh out of college in August 2015. Since then, I have been paying house rent of Rs. 12000 per month. HRA given by my company is Rs. 10000 per month. So, for the financial year 2015-2016, what will be my HRA exemption claim. Also for the period from August 2015 to March 2016, total house rent paid by me is Rs.12000×8 = Rs 96000, which is below Rs.1,00,000. So do I need to produce landlord’s PAN Card for HRA exemption for the financial year 2015-2016.?

      • By admin

        Rishabhji,

        Please go through the formula given in article to calculate HRA exemption. No need to submit PAN card as Rent is less than Rs. 1 Lakh.

  9. By Rishabh

    Ma’am I joined my company, fresh out of college in August 2015. Since then, I have been paying house rent of Rs. 12000 per month. HRA given by my company is Rs. 10000 per month. So, for the financial year 2015-2016, what will be my HRA exemption claim. Also for the period from August 2015 to March 2016, total house rent paid by me is Rs.12000×8 = Rs 96000, which is below Rs.1,00,000. So do I need to produce landlord’s PAN Card for HRA exemption for the financial year 2015-2016.?

  10. By Manish Kumar

    I have paid house rent for 3 months @ Rs6500/month. My basic salary id Rs 251850 & my yearly HRA allowance for FY 2015-16 is Rs 90000. After 3 months i got possession of my flat. Will i am eligible for HRA exemption & if yes then how much exemption i will get?

  11. By Sakal deo

    Mam
    I am getting hra less than Rs 3000/month, but paying House rent to my landlord more than Rs 3000.my landlord refuse to give receipt. I have to know is it necessary for me to give house rent receipt to my DDO for house rent deduction.

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