Owing a home is a dream of every salary earning individual. It takes a lot of time and efforts to fulfill this dream. The best part of owning a home is not to pay the rent. This the financial benefit and there are many other social benefits too. It sucks when you pay the rent. But then there is a concept of House Rent Allowance (HRA) which comes to our rescue. HRA is an important ingredient of salary. Not only it compensates the rent paid, but also helps in claiming tax exemptions.  So let us discuss the calculation of House rent allowance exemption.

Many of the salaried class taxpayers remain confused relating to the taxability of HRA received by them. HRA is an allowance a sum of money regularly paid to meet expenditure relating to rent.

1) DOWNLOAD THE AUTOMATIC HOUSE RENT EXEMPTION CALCULATOR  IN EXCEL

2) DOWNLOAD THE ARREARS RELIEF CALCULATOR U/S89(1) WITH FORM 10 E SINCE F.Y.2000-01 TO F.Y.2017-18

EXEMPTION OF HRA UNDER SECTION 10(13A) & Rule 2A
Condition
Under Section 10(13A), the condition to claim HRA Exemption is that the person who is in receipt of HRA, does not live in his own house, and pays rent in excess of 10% of his salary for his residential accommodation.
No Entitlement for Exemption:
  • When an employee stays in his house
  • When an employee does not pay any rent or incur any expenditure towards rent.
  • When the rent paid is less than 10% of salary
Points to be Considered:
  • The exemption shall be calculated on the basis of where the accommodation is situated
  • If Place of employment is the same for the whole year, then HRA Exemption shall be computed for the whole year. If there is change I place of employment is the same for the whole year, then HRA exemption shall be computed for the whole year. If there is change in place of employment during the previous year, then HRA exemption shall be calculated on monthly basis.
  • Exemption should be calculated in respect of the period during which rental accommodation is occupied by the employee during the previous year.
HOW TO CLAIM HRA EXEMPTION

As per income Tax Act, 1961 the employer need to deduct the TDS on salary of employee. He calls for all deduction/exemption proof from the employee. As an employee you need to provide the House rent receipts duly signed & Stamped to your employer. Generally every employer collects the HRA receipts at the end of the year. 

As per the Circular 17/2014 issued by CBDT for deduction of TDS on salary, it has been decided that as an administrative measure that salaried employees drawing HRA up to Rs. 3000/- p.m will be exempted from production of rent receipt. However this concession is only for the purpose of TDS, a income tax officer may call for rent receipt below Rs. 3000/-.


Further if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee.