As per the Finance Budget 2015 have no changes in House Rent Exemption Limit U/s 10(13A) and no changes the calculation process of HRA Exemption U/s 10(13A). Most of the Tax payers have not known that how to Calculate the House Rent Exemption U/s 10(13A). Given below the Calculation Process of HRA Calculation as per the Income Tax Act 1961 U/s 10(13A).
Employees generally receive a house rent allowance (HRA)
from their employers. HRA is an allowance and is subject to income tax.
An employee can claim exemption on his HRA under the Income Tax Act if he stays
in a rented house and is in receipt of HRA from his/her employer.
In order to claim the deduction, an employee
must actually pay rent for the house which he occupies. The rented premises
must not be owned by him. In case one stays in an own house, nothing is
deductible and the entire amount of HRA received is subject to tax. As long as
the rented house is not owned by the assessee, the exemption of HRA will be
available up to the the minimum of the following three options:
* The actual amount of HRA received
* 40% of salary. This increases to 50% if you
are renting out the house in major metros in India
* Rent paid minus 10% of salary (basic component
+ dearness allowance)
Salary here means basic salary which
includes dearness allowance if the terms of employment provide for it, and
commission based on a fixed percentage of turnover achieved by the employee.
The deduction will be available only for the period during which the rented
house is occupied by the employee and not for any period after that.
Example for Calculation of HRA
Exemption
HRA per month = Rs 15,000
Basic monthly salary = Rs 30,000
Dearness Allowance = Nil
Monthly rent = Rs 12,000
Rental accommodation is in Kolkata.
Exemption
Actual amount of HRA = Rs 15,000
50% of salary = 50% x (30,000 + 0) = Rs 15,000
Actual rent paid – 10% of salary = Rs 12,000 –
[10% of (30,000 + 0)] = 12,000 – 3,000 = Rs 9,000
Rs 9,000 being the least of the three amounts will be the
exemption from HRA. The balance HRA of Rs 6,000 (15,000-Rs 9,000) is taxable.
