House Rent Allowance (HRA) Exemption – Sec 10(13A)
Several allowances can be availed for all the employees as per the act introduced by the Income Tax department. Among numerous allowances, the relevant employers often give House Rent Allowance to the employees. In order to cover the house rents of various employees, the employer pays the House Rent Allowance. Such kind of HRA allowance falls under taxable amount for the employee. According to the Income Tax Act under the section 10 (13A), it provides deduction of House Rent Allowance to particular employees.
How to Calculate House Rent Allowance Deduction?
As per the section 10 (13A) by the Income Tax Act, the following amount of deduction from House Rent Allowance will be deducted from the taxable amount.
- The House Rent Allowance received by the Employee
- Rent paid by the Employee from 10 percent of the main salary
- 40 percent of the salary deducted. If the employee stays in Metropolitan city like Mumbai, Chennai, Delhi, 50 percent of the salary deducts from the taxable amount.
Exemption of HRA from Salary
- In terms of HRA, the salary includes various things such as Basic Salary of the Employee, Dearness Allowance and fixed commission acquired by the employee.
- The salary taken for the period of House Rent Allowance received.
- For calculating House Rent Allowance the Salary considered on a due basis.
Conditions fulfilled for claiming HRA deduction
Below are the conditions that must fulfil by every employee in order to claim for the deduction of House Rent Allowance:
- The HRA deduction is applicable for the employee only when the rent paid by the employee for the purpose of his/her residence. The HRA deduction is not applicable for the employee if the rent unpaid for certain period.
- If the employee pays the rent to their family members, the HRA deduction is applicable. The employee need not show any kind of proof legally but it recommends making such payment of the rent every month via Bank.
- There is no condition that the employee should not possess a property like house. There is a chance of claiming an exemption even if the employee owns a house property and applies for HRA deduction for residing in the rented house.
- The HRA deduction usually calculated on monthly basis at the end of the year. If there is any change in the salary, HRA, Rent of the House and City wherein the employee resides, there will be some alteration in the HRA as well. The employee is not applicable to get deduction if he/she makes the payment of the maintenance charge separately. The HRA deduction is not applicable for the maintenance charges.
- The employee could claim the HRA deduction, repayment of housing loan at the same time.
Consideration of HRA deduction by the Employer
- The Employer needs to submit the Form No.12BB. The Form includes various details such as Name, Address and PAN Number of the Landlord. If the employee pays a total rent exceeding Rs. 1, 00,000 then they need to submit the abovementioned Form.
- If the Landlord does not have a PAN Card, the employee needs to provide declaration to the employer including the Name and the Address of the Landlord.
- The house rent allowance is up to Rs.3, 000 per month, the employee excludes providing the receipt of the rent to the employer. This concession is applicable only for the tax deduction at source.
In order to calculate your house rent allowance on a monthly or yearly basis, you can make use of House Rent Allowance calculator.