One tax exemption almost everybody can avail is on House Rent Allowance (HRA)

To calculate HRA exemption, use the least of the following amounts:

  • Actual house Rent allowance received
  • Rent paid in excess of 10% of salary
  • 50% or 40% of salary (50% in case of Delhi, Mumbai, Kolkata & Chennai, 40% for other cities)

Salary for this purpose means :

basic salary + Dearness allowance + commission based on percentage (in any)

Here is an example of calculating HRA exemption :-

Basic Salary – Rs. 8,000 p.m.
Dearness allowance – Rs. 2,000p.m.
HRA received (actual) – Rs. 4,000p.m.
Actual rent paid – Rs. 5,000p.m

Adding it up for a year we get :-

Actual amount of HRA received (Rs.4,000*12) = Rs. 48,000
Rent paid in excess of 10% of salary (Rs. 5.000 * 12 – 10% of 10,000 * 12) = Rs. 48,000
50% of Rs. 1,20,000 = Rs.60,000

The least amount here is Rs. 48,000, so all of Rs. 48,000 is exempt from Income Tax.

* salary includes basic salary + dearness allowance
* Assuming that Delhi is the city for the purpose of this calculation

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1 Comment on HOUSE RENT ALLOWANCE U/S 10(13A)

  1. Sarvajeet Singh says:

    Thanks for writing interesting and necessary to know article………….
    Keep it up…….

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