Friday 13 January 2012

Deduction : House Rent allowance


I am a Govt. employee and staying at Chennai in a rented house. What are the rules regarding HRA deduction on salary?

House rent allowance (HRA) is received by the salaried class. A deduction is permissible under Section 10(13A) of the Incometax Act, in accordance with Rule 2A of the Income Tax Rules. You can claim exemption on your HRA under the Income Tax Act if you stay in a rented house and get a HRA from your employer.The HRA deduction is based on salary, HRA received, the actual rent paid and place of residence. The place of residence is important. For Mumbai, Kolkata, Delhi or Chennai, the tax exemption on HRA is 50 percent of the basic salary, while for other cities it is 40 percent of the basic salary.The city of residence is to be considered for calculating HRA deduction.
The least value of these is allowed as tax exemption on HRA:
Actual rent allowance the employer provides as part of salary in the relevant period during which the rental accomadation was occupied Actual rent paid for the house, less 10 per cent of basic pay 50 percent of basic salary if you reside in Mumbai, Calcutta, Delhi or Chennai, or 40 per cent if you reside in other cities.

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