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How to Calculate House Rent Allowance u/s 10(13A) of the Income Tax Act 1961?

Wondering how to Calculate House Rent Allowance u/s 10(13A) of the Income Tax Act 1961? Then you have come to the right place. The HRA is a part of your salary, and it is a taxable income that an employer offers for your home accommodation. Under section 10(13A), you can avail of tax benefits for your HRA allowance. Go through the article to know how to calculate your HRA and what are the documents that you need for availing tax benefits HRA. Not only that, we are here to tell you how much tax amount can you save from your salary for HRA.

What is section 10(13A) under the 1961 income tax act?

10(13A) 1961 Indian income tax act mentions 3 variables. Through these 3 variables, you can avail exemptions, No.1 is “Actual HRA Received” No.2 is “40% of Salary (50%, if house situated in any of the metro cities as in if you are staying in Mumbai, Calcutta, Delhi or Chennai)” and the last one is No.3 “Rent paid minus 10% of salary(Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission)”. But there are is the one-key point to remember, if you receive an HRA but staying in your own house the wholesome of your salary is taxable.

Who can Claim HRA?

HRA is only available for salaried persons, and it is a part of your monthly salary. HRA is rent accommodation. Hence, the self-employed persons can not claim tax benefits under Home Rent Allowance.

How much tax benefits you can get?

Your employer generates HRA. To avail tax benefits your actual rent should be lower than 10% of your basic pay.

In case you are living in a metro city, you can save up to 50% of your basic salary, and if you are living in a city other than metros, the amount is up to 40%.

How to Calculate House Rent Allowance
How to Calculate House Rent Allowance

How to calculate your HRA?

Let’s take an example, Mr Roy, who lives in a metro city like Gurgaon. He stays in a rented house, and he is paying 8000 monthly rent. Mr Roy’s monthly basic salary is 16000 rupees, and he gets Rs6000 as an HRA amount.

The tax amount is applicable to 20% of his income.

His annually HRA’s amount is (Monthly HRA’ Amount * 12) 72000 rupees. For metro cities his salaries 50%(50%*Rs16000*12) Rs96000.

Actual rent amount minus Basic salary’s 10% (Rs8000X12)-(10% of Rs16000X12)= Rs 96000-Rs19200= Rs76,800

This Rs 76800 is the exampted tax amount from Mr Das’s HRA’s amount.

What documents Do You Need for the HRA exemption?

To claim the HRA’s tax exemptions, you have to submit your monthly rent receipts. If your rent amount is crossing 1 lakh accommodation limit in a financial year, then your landlord’s pan details are required for HRA’s claim. In case your landlord does not have a pan card, a self-declaration letter needs to submit.

A Special Situation Where You Can Avail Tax Benefits Through HRA

Paying rent to family members:

As the HRA claiming person, you can not be the owner of the rented house. Rest, if you are paying rent to your parents or any other family dependent, you can claim for tax deduction under HRA. One thing to remember is, if the house owner is your spouse, the HRS’ tax benefits will not be available. As the view of Indian tradition, you and your wife should take a rented house together for accommodation. Even if your parents are your landlord, make sure that you have proper renting documents and financial transactions report of your rented home. The tax department has the authority to reject your HRA’s claim if they are not satisfied with your financial transaction. 

The Frequently Asked Questions

Here we are going to address the most frequently asked questions on the topic.

Can anyone get HRA tax benefits?

No, because not everyone paying rent for their houses and not everyone gets the HRA from their employer. Also, self-employed people are not getting HRA benefits.

Can I get tax benefits for paying rent for family members?

Yes, you can only if you have enough documents that prove that you are paying rent for your parents.

Can I get tax benefits on my house maintains charges?

No, HRA benefits will only available for rent paid. Maintenance charges, electricity bills, water bills, does not part of the HRA.

I am living in a rented house, but my HRA is not included in my monthly earnings. Can I get any tax benefits?

Under section 80GG, if you are staying in a rented house, you are eligible for tax benefits, but you do not qualify for HRAs Income Tax Act 1961 under 10(13A).

Final words

Now you know everything about the tax benefits you can avail from the HRA deductions. Availing the support of a financial adviser at the time of tax filing is something you can consider for a smooth settlement. To know more about different tax saving options, keep reading us. Adieu, guys. Happy tax saving!