Exemption of (HRA) House Rent Allowance u/s 10(13A)

By | 08/27/2018

(HRA) House Rent Allowance u/s 10(13A) exemption, confused!

Every employee heard and seen this term “(HRA) House Rent Allowance” in their salary slip.

The question is  “Is HRA taxable?”

The answer is “Yes and No”.

In this article, you will understand the whole story behind HRA, how we can get tax exemption u/s 10(13A).

In one of my previous article “What is Form 10 BA – “Declaration u/s 80GG” – House Rent

What is Form 10BA

Under section 80G, you can avail the benefit of house rent up to ₹ 60000 (₹ 5000/month), only on basic condition:

Also Read: Tax deduction u/s “80G” of Income Tax Act (relief on charity)

“You have not received HRA from your employee in any form during the financial year.”

But!

If you receive HRA house rent allowance from your employer as a compensation of rent payment.

Condition required to avail the benefit of section 10(13A)

  1. An employee is the residence of India, rented a house and pay rent to the house owner.
  2. Must get HRA in any form from its employer.
  3. You must get a proper receipt of rent paid in prescribed format from the owner of the house.

If you are not paying any rent, the whole amount received under HRA is taxable. 

Also Read: Advance Tax “Challan No. 280” – (Step by Step Guide)

The basic fundamental of how HRA is decided?

Actual HRA is calculated on three basis concept:

  • The amount of HRA received from the employer.
  • Actual rent paid less (10%) of the basic salary.
  • If an employee living in the metro (50% of salary) and for Non-metro (40% of salary).

After calculation in all three scenarios, the amount comes least will be exempted u/s 10(13A).

HRA calculation for income tax

For better transparency lets take an example:

I share my own salary structure.

Basic salary: ₹ 30000

HRA: 13000

Convenience: 2000

Special allowance: 3000

Medical: ₹ 1250

LTA: 5000

TOTAL EARNING: ₹ 54250

Also Read: Why to Pay interest u/s 234A, 234B & 234C “with example” under Income tax act?

Taking the above example we will work on all three scenarios: (As I am living in Non-metro, eligible for 40% of basic salary)

  • Scenario A – The amount of HRA received from the employer – ₹ 13000/month i.e. 13000X12 (months) = ₹ 156000 per annum.
  • Scenario B – Actual rent paid less (10%) of the basic salary – 10% of basic salary, 10% of 30000 = 3000 per month i.e. 36000 per year, actual rent paid 10,000 per month i.e. 1,20,000. The result would be 120000 – ₹ 36000 = ₹ 84000.
  • Scenario C – 40% of the basic salary i.e. 40% of 30000 = 12000/month, ₹ 1,44,000 per year.

In all the above scenario, 84000 is exempted, because of the least amount, and rest amount i.e. 156000 – 84000 = ₹ 72000 is taxable.

If an employee is resident in metro he is allowed to take basic salary @ 50% in scenario C.

House rent allowance section is difficult to understand, but it will help the employee and they will avail the benefits of all house rent allowance rules and regulations.

Also Read: Complete guide on Income Tax deduction u/s 80C, 80CCD, 80CCC & 80CCG

Author Profile

Amit Bansal
Amit Bansal
Hey, Amit Kumar Bansal, the man behind this blog. I always passionate about Taxes, Stock Market. This was one of the reasons why I have chosen the field of account. Blogging was not the coincidence it was a proper decision. The main aim of this blog is to help readers to take an informed financial decision. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.

One thought on “Exemption of (HRA) House Rent Allowance u/s 10(13A)

  1. vipin

    hi Admin;
    the way your blog looks is killer.
    I had not expected such a detailed article on exemption in HRA, but again it was awesome and incredible.
    By your blog I say repeatedly that content is the real king.
    Thanks
    Vipin

    Reply

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