ALLOWANCE : EMPLOYEE’S HRA

An  employee  at  Trivandrum living in a rented house. What is the treatment of House Rent Allowance in the case of an employee?

Provided that expenditure on rent is actually incurred, exemption available shall be the least of the following :

(i)            HRA received.

(ii)           Rent paid less 10% of salary.

(iii) 40% of Salary (50% in case of Mumbai, Chennai, Kolkata, Delhi) Salary here means Basic + Dearness Allowance, if dearness allowance is provided by the terms of employment.