The following is a summary of the provisions of Indian income Tax Act 1962 for determining the HRA exemption amount.These provisions are applicable for both current and previous assessment years. If you are a salaried individual and is already aware of the provisions, you may directly proceed to use our HRA Calculator for ascertaining the non-taxable portion of HRA received from your employer. You may also ascertain your tax liability by using the Income Tax Slab rates for the current assessment year.
HRA Provisions under Indian Income Tax Act
As per Section 10(13A) of the Indian income Tax Act 1962 and Rule 2A of the Income Tax Rules, House Rent Allowance (HRA) received from the employer is exempt from tax to the extent of the least of the following:
- Actual annual HRA received from the employer.
- Rent paid in excess of 10 percent of salary.
- 50 percent of annual salary, if the employee lives in the four metro cities of Delhi, Mumbai, Chennai and Kolkata or 40 percent of annual salary if the employee lives in any other town or city in India.
Annual salary is aggregate of Basic salary, Dearness allowance and commission, if any based on fixed percentage of turnover, received during the 12 month period of the financial year (April to March).
However one must keep in mind that HRA exemption under the provision of section 10(13A) of the ACT is available only for salaried individuals and not for self-employed people. Section 80GG of the the Act provides similar provisions for self-employed people to claim tax exemption in respect of rent paid on their leased accommodation.
Determine your HRA exemption amount using our free calculator below. You don’t need an Excel tool for calculating this.
Documentary proof required for claiming HRA exemption
An assessee claiming HRA exemption need not furnish any documentary evidence to the Income Tax department at the time of filing the return. However, he must produce such evidence when demanded by the Income tax assessing officer. This may include a signed formal rental agreement (on a stamp paper) between the assessee and the owner of the property rented out by him, in respect of which he claims such HRA exemption. The rental agreement may state all relevant facts including the rent paid per month or per annum and any other payment made towards maintenance, security deposit etc. The rental agreement shall also state the PAN Card number of the owner of the house property rented.
There shall also be rental receipts issued by the owner of the property to the assessee in respect of the rent paid. It will be even better if such rental payments are made by way of writing a cheque or online transfer of funds from the assessee’s account to the bank account belonging to the owner of the house property and the cheque numbers are mentioned in the rental receipts. Further, the assessee must actually reside in the rented property and shall not claim any other house property as self occupied house property in the same city in which the property in respect of which the HRA exemption is claimed.
The above documentary evidences like rental agreement, rental receipt and copies of cheques issued shall be kept by the assessee even if the rent is paid to his parents in respect of the property rented. Such documents must be produced by any salaried employee to the employer as proof for claiming HRA exemption and allowing the same as deduction from taxable income while computing the tax to be deducted at source (TDS) in Form 16.
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