House Rent Allowance (HRA) is an allowance given by an Employer to its Employee to pay Monthly House Rent.
We can avail some Income tax Exemption on HRA amount under section 10(13A). This amount is taxable if you are not living in rented house or not don’t claim for tax exemption.
How HRA is calculated ?
HRA Calculation is based on 3 factors as below:
1. Actual HRA amount given by your Employer.
2. 50% of Basic Salary if you are living in Metro City OR 40% of Basic Salary for Non-Metro City
3. Actual Rent paid less 10% of the basic salary.
Example Calculation :
Let’s Suppose your Basic Salary Per month is Rs 30,000/- Then Annual Basic Salary will be (30,000 x 12) Rs 3,60,000
10% Of annual Basic Salary = Rs. 36,000
Actual HRA Given by Employer pm is Rs. 12,000/- So, Annual HRA will be = Rs. 1,44,000
If you pay Rs. 10,000/- rent Monthly then Annual Rent amount will be Rs. 1,20,000 then your Tax exception will be [Annual Rent Paid – 10% of annual basic salary] Rs. 1,20,000 – Rs. 36,000 = Rs. 84,000
- PAN card is mandatory if your annul rent amount exceeds Rs. 1,00,000