Tax liability and Exemption on House Rent Income.

Salaried Asssessee received House Rent Allowance is exempt u/s. 10(13A) of Income Tax Act-1961 read with Rule 2A of Salaried Assessee. The following clarification are properly clear the picutre that how to get exemption of HRA.

Assessee receiving HRA from Employer:
Salaried Assessees who are in receipt of House Rent Allowance (HRA) from an employer can claim an exemption u/s 10(13A) of the Income Tax Act-1961 read with Rule 2A of the Income Tax Rules, 1962.
The least of following can be claimed as deduction u/s 10(13A):

1. An amount equal to 50% of salary, where the residential house is situated at Bombay, Calcutta, Delhi or Madras and an amount equal to 40% of salary where residential house is situated at any other place;
2. House rent allowance received by the employee in respect of the period during which the rental accommodation is occupied by the employee during the previous year; or
3. The excess of rent paid over 10% of salary.

Following points need to be taken in to consideration while calculating the amount of HRA admissible as exemption u/s 10(13A):

1. “Salary” for the purpose of computation of exemptions u/s 10(13A) means Basic Salary and includes Dearness Allowance if terms of employment so provide. It also includes commission based on a fixed percentage of turnover achieved by an employee as per the terms of contract of employment AND EXCLUDES ALL OTHER ALLOWANCE & PERQUISITE.
2. Exemption is not available where an employee lives in his own house, or in a house for which he doesn’t pay any rent.

Assessee not receiving HRA:
In case of other Individual assessees who are not in receipt of HRA from an employer but are living in a rented premises, option of claiming deduction u/s 80GG is available.

Posted in: House Rent Allowance,HRA Exemptions,Income Tax Exemptions