HRA tax exemption under section 10 (13A)

Updated on February 29th 2016: Majority of the salaried people get an allowance for taking care of the rent that they pay for their home. This is called House Rent Allowance, or HRA.

The Indian Income Tax Laws considers housing as a basic necessity, and hence gives sympathetic treatment to the HRA Allowance received by the employees, by way of giving some tax benefits under section 10 (13A) of Income Tax Act, Government of India.

For the financial year 2016-17 the limit of deduction of rent paid has been increased from Rs 24,000 per annum to Rs 60,000 to those who do not get HRA allowance and don’t own any house and live in rented accommodation.

The tax benefit available to the employee on the HRA received is treated as follows for computation of Income tax.

The minimum of the following is available as exemption from employee’s earning.

The actual HRA received from your employer

OR

The actual rent paid by you for the house, minus 10% of your salary (this includes basic + dearness allowance, if any)

OR

50% of your basic salary (if you live in a metro) or 40% of your basic salary (if you live in a non-metro)

Let us consider a hypothetical case or evaluate with an example.

Consider the Salary Components as follows:

Basic: Rs. 15,000,  Dear Allowance(DA) or other allowances Rs. 5,000 and HRA: Rs. 9,000

So a total salary of Rs 29,000

Let actual rent rent paid be: Rs. 10,000

You live in Mumbai (It is a Metro in Income Tax Computation. it is a Metro otherwise too!).

Now let us understand how the rule works.

1. The actual HRA received from employer = This Amount is Rs. 9,000

2. The actual rent paid for the house minus 10% of the salary (Excluding HRA Component)

This would be Rs. 10,000 – 10% of (Rs. 15,000 + Rs. 5,000) = Rs. 10,000 – Rs. 2,000 = Rs. 8,000

3. Fifty percent 50% of your basic salary

Since you live in a metro, this would be 50% of Rs. 15,000 = Rs. 7,500

The minimum amount out of 1, 2 and 3 is Rs. 7,500. Therefore, the amount of HRA exempt from tax is Rs. 7,500 per month.

The remaining HRA amount of Rs. 1,500 (Actual HRA received Rs. 9,000 Minus exempt HRA Rs. 7,500 = Rs. 1,500) would be added to your taxable income.

13 comments to Income tax rebate on HRA

  • Vasanth

    Please explain, How much tax is applicable on the taxable HRA amount?

  • Manish Sahu

    Do in this scenario i need to submit landlord pancard? As my approved HRA is 7,500 * 12 month = 90,000 (below one lakh).
    But have paid 10000 (actual rent) * 12 month = 1,2000 (above one lakh).

    ———————————————————————–
    1. The actual HRA received from employer = This Amount is Rs. 9,000

    2. The actual rent paid for the house minus 10% of the salary (Excluding HRA Component)

    This would be Rs. 10,000 – 10% of (Rs. 15,000 + Rs. 5,000) = Rs. 10,000 – Rs. 2,000 = Rs. 8,000

    3. Fifty percent 50% of your basic salary

    Since you live in a metro, this would be 50% of Rs. 15,000 = Rs. 7,500

    The minimum amount out of 1, 2 and 3 is Rs. 7,500. Therefore, the amount of HRA exempt from tax is Rs. 7,500 per month.

    The remaining HRA amount of Rs. 1,500 (Actual HRA received Rs. 9,000 Minus exempt HRA Rs. 7,500 = Rs. 1,500) would be added to your taxable income.

  • Kamlesh

    Dear Sir,
    My basic is INR 20000, Adhoc allowence is INR 65000 and HRA is INR 10000. I am live in Mumbai and paying INR 22000 for house rent. How much I can claim HRA.
    Regards,
    Kamlesh

  • RP

    Sir
    My salary is Rs 40000 pm (Fixed),
    i am paying House rent of Rs 5000 Pm
    How i can claim HRA

    • Financial Advisor

      If salary is fixed there is no claim for HRA, everything is included in that. You can only claim rebate on income tax on HRA to a certain limit

  • shalini

    LIC premiums are paid thru my Husband’s credit card. Can i claim the I Tax rebate for that, since I am the proprietor of one and other is Jeevan saathi which is valid for both of us.

  • bhuvana ganesh

    Dear Sir,

    I am an NRI housewife and have recently rented out my flat in chennai for bank lease for 3 years. The monthly rent is fixed at Rs 29,000/-. I understand monthly rent would be credited to my NRO account after deduction of TDS at 10%. The tenant told me that I can claim this TDS back. Kindly advise how I can claim this amount back. Also kindly advise if by submitting any Form direct to the Bank, can I request them to stop deducting the TDS.

    Thank you very much for your time and I look forward to your response.

    Regards Bhuvana Ganesh

  • V Kapur

    Please Carify:
    My Son has following details:
    Basic on salary= 437,953.00
    House Rent Allowance on salary certificate = 218,976.00
    House Rent Allowance 40%of basic for non metro = 177436.80

    How much HRA will be considered by me Receiving the amount (HRA) for Income Tax i.e. Rs. 177436.80 or 218976.00 for my calculations

    Thanks
    Your com

  • pasha

    Sir,
    Please clarify:
    a) Is there a clear rule which says that one is elegible to claim HRA deduction if and only he/she has paid a rent in excess of 10% of his /her basic pay?
    b)suppose “A” pays a rent of Rs 4000 gets a HRA of Rs 3400, his/her 10% of the basic pay would be Rs 7000, in this case rent paid is less than 10% of basic pay HRA received is also less than 10 % of the basic pay ,hence whether “A” has any option to claim deduction conerning rent allowance/rent paid?
    please clarify.

    Thank you

  • KMS KUTTY

    I am a pensioner of state bank of india. I am residing in a rented premises paying annual rental of Rs.72000/- My total income is Rs.2,08,830/- and my incme from bank deposit is Rs.2,22,858/-. Will you kindly tell me my income tax liability. I am 64 years. kmskutty

    • sekhar

      iam a govt empoly received salary arreras for the last five years ,i came to know that the arrears belongs to beyand previus three or more years we lost interest so there is no tax for that amount is it correct

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