How much Rent to be paid to avail all House Rental Allowance (HRA) received from Employer

Situation 1: How to claim House Rental Allowance ( Direct Route)

  • What is statutory Provision for computation of House Rental Allowance (HRA)?

HRA is a special allowance specifically granted to employee by his employer towards payment of rent for his residence. HRA is granted on the basis of three category of conditions which are

Metro Cities (i.e. Delhi, Kolkata, Mumbai, Chennai)

Other Cities

1)    HRA actually received.

1)    HRA actually received

2) Rent paid (-) 10% of salary for the relevant period

2)    Rent paid (-) 10% of salary for  the relevant period

3)   50%  of  salary  for  the  relevant period

3)    40% of salary for the relevant Period

 

Section  10 (13A) of Income Tax Act,1961 specify the condition for claim of Partial allowance

  1. Exemption is not available to assessee who lives in his own house, or in a house for which he has not incurred the expenditure of rent.
  2. Relevant period means period on which assessee occupied the accommodation or claimed his accommodation as rent
  • Important term is Salary : it includes only Basic Salary, Dearness Allowance ( if Provided in terms of employment) and Commission as a fixed percentage of Turnover.

Example: Suppose Mr. D.J.  is earning the following Salary during the year of his employment and  paying Rent of Rs 6000 per month.

Salary Income

  
    

Basic

 ₹  1,45,116.00

  

VDA

 ₹      91,226.10

  

FDA

 ₹        1,224.00

  

P.Pay

 ₹        2,592.00

  

HRA

 ₹      47,820.00

  

Education Allowance

 ₹      33,900.00

  

Transport Allowance

 ₹      31,302.00

  

Technical Allowance

 ₹      19,920.00

  

Special Allowance

 ₹      33,000.00

  

Other  holi

 ₹        1,526.40

  

Acting

 ₹              21.36

  

FPIS/Cig. PIP

 ₹        9,509.20

  

IMES

 ₹        3,651.14

  

Overall Efficiency

 ₹            341.70

  

Attn. PIP

 ₹        1,880.00

  

Stitching Charges

 ₹        1,255.00

  

Annual Prod Bonus

 ₹      20,000.00

  

Total Leave Encashment

 ₹      30,000.00

  

Medical reimbursement

 ₹        2,956.00

  

LTA

 ₹       4,000.00

  

Lumpsum Amount

 ₹        5,000.00

  

Attendance LTA

 ₹            210.00

  

Washing Allowance

 ₹        4,200.00

  

 Gross Total

 ₹  4,90,650.90

  

Add: Advance Salary of the Current Year

 ₹      60,000.00

  

Less: Advance Salary of P.Y recovered

 ₹      (6,650.00)

  

Net Total

 ₹  5,44,000.90

  
    

Computation of HRA

 

HRA Exempt U/s 10 (13A)

   

a) Rent Paid Less 10% of Salary

 ₹      35,984.19

  

b) Actual HRA Received

 ₹      47,820.00

  

c) HRA Calculated Based on Non Metro Cities

 ₹      96,063.24

  

HRA Exempt U/s 10 (13A) [ least of a,b,c ]

 

 ₹    35984.19

 

 

Note: In this Case Mr. D.J. is not able to take the full benefit of Actual HRA Received and liable  to  pay additional Income Tax on amount of Rs 47820 – Rs 35984.19 i.e of Rs 11835.81

If Mr. D.  J. is in the tax Bracket of 30% then he has to pay additional tax of Rs 3550.74 + cess however he could save these tax by some smart tax planning

 

Situation 2: How much rent to be paid to adjust whole House Rental Allowance ( Indirect Route)

( kitna  rent pay kare ki mera  sara HRA claim ho jaye?)

Take the above example of Mr. D.J and if his working is as below then He could save  extra tax burden on him:

Working

    

Particulars

 Yearly

Estimated Monthly Rent

 Adjusted Rent

 Allowable Salary

Rent Paid

Allowable salary + actual HRA received =

₹      71,835.81

Mr. D.J is receiving HRA equivalent to  ₹      5,986.32

 Mr. D.J. has to Pay per month rent

₹         6,000.00

 ₹                              –  

Salary ( Basic+VDA+FDA+P.Pay)

 ₹  2,40,158.10

 ₹                   –  

 ₹                         –  

 ₹               24,015.81

 

Adjusted Rent should be anything above Estimated Monthly Rent.

Now if he is paying Rs  6000 per month then he could save entire HRA received from his employer and tax saving will be Rs 3550.74 + cess

 

Computation of HRA

HRA Exempt U/s 10 (13A)

  

a) Rent Paid Less 10% of Salary

 ₹      47,984.19

 

b) Actual HRA Received

 ₹      47,820.00

 

c) HRA Calculated Based on Non Metro Cities

 ₹      96,063.24

 

 

HRA Exempt U/s 10 (13A) [ least of a,b,c ]

 

 ₹    47,820.00

Guys, if you need Excel copy of above calculation just comment below your E-Mail id. 

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