NEWS & ADVICE : HOME LOANS
Tax Deduction on HRA (House Rent Allowance)
By Neelima Shankar
Print    Email    RSS   

HRA Calculation

The actual HRA deduction that one can avail under Section10 (13A) would be the minimum of the following:

  • The actual amount of HRA received.
  • 50% of the salary for individuals residing in metros (Delhi, Mumbai, Chennai or Kolkata) and 40% otherwise.
  • Rent paid minus 10% of salary (basic component + dearness allowance).

For instance an individual staying in Delhi earns a basic salary of Rs 40,000 per month and rents an apartment for Rs 18,000 per month. He receives an HRA of Rs 25,000 from his employer. His HRA deduction will be the least of the following three figures:

  1. The actual HRA received: Rs 25,000
  2. 50% of the salary (since he is staying in a metro city) : Rs 20,000
  3. Excess of rent paid over 10% salary: Rs 18000 - Rs 4,000 = Rs 14,000

Therefore the tax exemption will be Rs 14,000 and the net taxable HRA for the individual will be Rs 25,000 (HRA received) less Rs 14,000 (HRA deduction eligible), which will be equal to Rs 11,000.

Meanwhile if an individual stays in his own property and also gets an HRA from his employer, he will not be entitled for the HRA deduction under the Income Tax Act.

Also one often gets confused whether he will get the HRA benefit if he is already receiving deduction on his repayment of home loan. It should be understood that deduction on home loan and HRA benefits are two different issues under the Income Tax Act. The tax benefits on home loan and HRA can be claimed together by an individual if he fulfills the eligibility criteria on deductions relating to home loan and HRA.

 


Page    | 12 |
(Comments Posted : 99) Post Your Comments
1. I am staying in home with lease agreement, the amount is 5 lacs. any tax benefit available.
Muthu (Posted: Apr 26, 2015)
2. I am staying in home with lease agreement, the amount is 5 lacs. any tax benefit available.
Muthu (Posted: Apr 26, 2015)
3. SIR, ,PLEASE LET ME INFORM, THE MAXIMUM AMT. OF RENT CAN BE PAID TO MY PARENTS FOR CLAIMING HRA DEDUCTION.IS THERE ANY CEILING ON RENT AMT.WHICH CAN BE PAID TO MY PARENTS. CAN WE PAY RD, 30000 PER MONTH YO MY PARENT, AS HOUSE RENT, KINDLY INFORM BHARAT BHUSHAN MOB . 09795399572
Bharat Bhushan (Posted: Mar 6, 2015)
Show All Comments
COMPARE QUICKLY
 Select a product:
 

CALCULATE QUICKLY
 Select a product:
 

EDITORS' PICKS
Six tips to choose your home loan lender
Home Loan: A way to reduce your taxable...
Home Loan Agreement: An important aspect...
Paying back home loans: Which repayment...
How to go about ‘Leveraged Investing’


PINJORE: CaℒL Giℛℒs In PiNjOrE 09915787550...
PINJORE: CaℒL Giℛℒ In PiNjOrE 09915787550...
how to gate my home loan certificate

NEWS THIS WEEK
Canara Bank earned a profit of 60%. Feb 6, 2015
New Branch of Laxmi Vilas bank at Vijayawada Jan 30, 2015
Home loan EMIs expected to drop down Jan 21, 2015
Corporation Bank received MSME banking excellence award 2014 Jan 19, 2015
Home loan rates set to fall, after reduction in repo rate Jan 16, 2015
News Archive