How HRA Tax Exemption is calculated u/s 10(13A)? – Calculation Guide

What is House Rent Allowance (HRA)

House Rent Allowance is the part of salary every employee gets from their employer which is clearly shown in the salary slip. House Rent Allowance (HRA) is given to meet the cost of rent paid by the employee for his stay. The Income-tax department allows the employee for House Rent Allowance Exemption u/s 10(13A), In short, the employee in accordance with some condition u/s 10(13A) gets tax exemption on the amount paid under House Rent Allowance.

Cutting Long story short,

In this article, you will understand the whole concept of House rent allowance exemption, how we can get tax exemption u/s 10(13A).

Does every Employee find an answer on how to claim maximum HRA tax exemption? Yes

The different scenario of House Rent Allowance, Employee, Rent paid or Own House

There are a few different scenarios, we must understand very clearly before putting your condition.

• You are getting (HRA) House Rent Allowance, but you are living in your own house.
• Getting House Rent Allowance from your employer, but you are living in a rented house.
• You are not getting HRA from your employer and living in your own house.
• You are not getting HRA from your employer and living in a rented house.

All four scenarios are different, and we all fall under one or another scenario. Now the question is how tax exemption u/s 10(13A) works.

(HRA) House Rent Allowance u/s 10(13A) exemption, works only for scenario 2 (Getting House Rent Allowance from your employer, but you are living in a rented house).

If you are not paying any rent/living on your own house, the whole amount received under HRA is taxable.

Also Read: Tax Relief under section 89(1)

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 the prescribed format from the owner of the house.

The basic fundamental of how HRA is Calculated?

Actual HRA is calculated on three basic concepts:

• 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 basic salary) and for Non-metro (40% of basic 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: Interest u/s 234A, 234B & 234C

Taking the above example we will work on all three scenarios for hra tax exemption: (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.

Few HRA Exemption Examples in Tabular Form

How much house rent allowance is exempt, You can get the detailed information below:

Living in Bhopal (Non-metro) and the actual rent paid is ₹ 10,000 per month.

Living in Delhi (Metro) and the actual rent paid is ₹ 10,000 per month.

In both the cases ₹ 84000 is exempt under section 10(13A).

Download Excel based – Income tax calculator

Conditions for claiming house rent allowance exemption u/s 10(13A)

• Deduction under section 10(13A) is allowed only if the employer is getting HRA from their employer.
• If the Employee is not paying any rent in any form the whole HRA amount is Taxable.
• Always keep proper rent receipt from the landlord, the income tax officer may ask any time.
• If any change in rent or city (Metro or Nonmetro), the HRA required to calculate on a monthly basis.
• If the employee should own his house, and living in rented property, He/She can avail HRA benefits.
• A person can claim house rent allowance, home loan interest u/s 24b, repayment of a housing loan under section 80C simultaneously.
• Maintenance charges does not fall under section 10(13A).

What if you are not getting HRA from your employer and living in a rented house

Under section 80GG, you can avail the benefit of house rent up to ₹ 60,000 (₹ 5000/month) only if No HRA is provided by the employer.

It is mandatory to disclose the HRA amount exempted under exempted section (for reporting purpose) in ITR 1.

How to calculate HRA in Excel

You can download HRA calculation in excel sheet for free HRA Calculator

Where to fill HRA in ITR 1?

Frequently Asked Questions about HRA.

Whether HRA is calculated on a monthly basis or annual basis.

Basically, HRA is calculated on an annual basis, other then that if any change like (Salary, HRA received, Rent paid, City (whether metro or non-metro) encountered, calculation on monthly basis is required.

Can both spouses claim HRA separately?

Yes, But both have to receive rent payment received separately, or One receipt mentioning separate rent received from both the members. In that case, both the members take benefits under section 10(13A).

Is There any other self-employed avail benefit u/s 10(13A)?

A self-employed person does not get any amount in the form of salary, So no question of HRA and benefits under section 10(13A), but If a self-employed person is paying rent can claim a deduction under section 80GG (maximum limit ₹ 5000/month.

Documents required to submit for claiming HRA?

The only document required is proper rent receipt which reveals month, amount of rent paid, year, Name of person rent paid, Name of person rent received, proper address of the rented property and the receipt is signed. If the employee is drawing HRA ₹ 3000 per month, no such receipt is also required.

If Living in Own house, what would be the treatment?

One cannot enjoy house rent allowance exemption because there is no question of rent paid, the person can not avail the benefit of house rent allowance exemption u/s 10(13A) as well as section 80GG. and the whole HRA received is taxable.

Is it possible to claim HRA as well as the Home loan (Principal and interest amount) simultaneously?

Of Course~

Income tax department allowing the taxpayer – how is an employee also, both HRA u/s 10(13A) and Home loan principal repayment amount u/s 80C along with interest payment annual u/s 24.

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

Can I claim HRA if I own a house in same city?

In this case, property owned by you will be treated as a ‘let-out’ property (even if it is left vacant). Secondly, you are entitled to receive HRA and it is not taxable. But, do remember that this is a tricky situation. Your reasons for staying in a rented house should be reasonable and justifiable (during tax scrutiny, if any).