- Actual HRA paid by the employer.
- If the claimed accommodation is in any of the metros like Delhi, Mumbai, etc. then 50% of the salary amount is considered. For all other cities, 40% of the total basic salary can be claimed for deductions.
- Rent paid in excess, calculated annually over 10% of the salary per annum
- To avoid your excess Tax Deducted at Source (TDS) amount from your salary, individuals need to furnish rental agreement and/or rent receipts for submission to the employer.
- In case the above documents haven’t been submitted, individuals can submit rent receipts/rental agreement to the employer and then claim the benefit at the time of filing of IT returns.
- Persons residing with parents and paying rent to them are also eligible to claim the tax-exemption on submitting documented proof.
- The entire HRA amount that you receive will be taxable if you have HRA provisions in your salary but are residing in your own flat.
Here’s what his monthly payslip looks like-
|Special Allowance||Rs. 1000|
|Medical Expenses||Rs. 1250|
|Total Earnings||Rs. 33250|
To do HRA tax calculation of Mr. X, we have the following information:
- His basic monthly salary is Rs. 20,000, which will be considered as there is no commission or dearness allowance (DA).
- The HRA component is 9,000 INR
- 10% of the annual basic salary amounts to 24,000 INR
- The amount received by the employee as HRA = Rs. 9,000 X 12 (months) = 1,08,000 INR
- Or, Actual rental payment less 10% of basic = (7,000 X 12) INR – 24,000 INR = 60,000 INR
- 50% of basic salary will be considered here as he lives in a metro = 1,20,000 INR
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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