HOUSE RENT ALLOWANCE Sec.

10 (13A)

Objective: To claim exemption for House Rent Allowance under Sec.10 (13A).

Definition as per Income Tax Act, 1961:

any special allowance specifically granted to an assessee by his
employer to meet expenditure actually incurred on payment of rent (by
whatever name called) in respect of residential accommodation
occupied by the assessee, to such extent as may be prescribed having
regard to the area or place in which such accommodation is situate
and other relevant considerations.]
[Explanation.—for the removal of doubts, it is hereby declared that
nothing contained in this clause shall apply in a case where—
(a) The residential accommodation occupied by the assessee is owned
by him; or
(b) The assessee has not actually incurred expenditure on payment of
rent (by whatever name called) in respect of the residential
accommodation occupied by him]
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Rule: Under Sec. 10(13A), an employee who is in receipt of House Rent

Allowance (HRA) can claim exemption, if he does not live in his own house, and
pays rent in excess of 10% of his salary for his residential accommodation.

The assesse is not entitled to receive HRA in the following cases:

a) When the assesse stays in his own house, i.e. the property is in Assesse
name.
b) When the assesse does not pay any rent or incur any expenditure
towards rent,
c) When the assesse rent paid is less than 10% of salary.

ÆThe exemption shall be calculated on the basis of where the accommodation

is situated.

ÆIf place of employment is the same for the whole year, then exemption shall
be calculated for the whole year.

ÆIf there is a change in place during the previous year, then it shall be
calculated on monthly basis.

ÆExemption should be calculated in respect of the period during which rental

accommodation is occupied by the employee during the previous year.
Computation of taxable HRA:

Step 1: - Salary= Basic Salary + DA considered for Retirement Benefits +

Commission forming part of Salary as a Fixed Percentage of Turnover of the
Employee.

Step 2: - Taxable HRA:

Amount received during the financial year towards HRA

Less: Exemption u/s 10(13A) is the least of the following

1. Actual amount of HRA received

2. 50% (for Chennai, Mumbai, Kolkata and Delhi)/40% (for other places) of
the Salary for the relevant period
3. Rent paid Less 10% of Salary for the relevant period.

FAQ’s on HRA:

1. How to calculate HRA exemption, monthly or yearly?

HRA exemption calculation is depended on four variables as House rent

allowance received, house rent paid, salary and location of the house. If all of
these remains same in a year then you can calculate it on yearly basis
otherwise for each set of variable, you have to do separate calculation. Suppose
DA is changed then you have to calculate separate calculation.

2. I have received salary arrears of last years. For HRA exemption arrears is
to be
Included or not?

For HRA exemption, salary of the relevant period for which we are calculating
exemption is to be taken. So arrears are not being included for HRA purposes.
Salary on due basis is to be taken.

3. I have paid rent to my wife/Father. Can I claim HRA exemption?

If this is actual payment then yes you can claim rent exemption even if the rent
is being paid to your family members. But remember House must be on their
name or he/she must be authorized to receive rent on the property. Though the
above point have no relation with HRA exemption but tax planning should be
done carefully and remain with in limit.

4. Whether PAN no. of landlord needs to be mentioned on rent receipt?

No, there is no such requirement under the tax law.

5. How Much Tax Exemption Do I get if I live in my own House?

NIL. If you live in your own house than HRA Exemption is not for you. HRA Tax
Deduction under Section 10 (13A) is only for those who live in the rental house.

6. I am living with my parents and home is in my mother’s name. How can I

get tax benefits? Is there any legal way?

You can show that you are living in your parents’ house as the tenant and pay
them the monthly rental. In this way you can get the HRA benefit.

7. Can someone, who is working onsite India for few months every year, avail

HRA against rent paid in the country other than India?

No, the HRA Exemption is applicable only if you are living on rent in India.

8. How to determine of the 40% of salary or 50% of salary whether based on

family residing city or office premises located city?

What is you are working in Metro city and your family is not living in the
Metro city? In this case, whether we should consider 40% of salary or 50%
of salary?

You have to calculate the HRA based on your residing city where your office is
located and where you are living in the rental house. For example if you are
working in Bangalore, then HRA will be calculated for Bangalore only. Not in
Ahmedabad where your parents are located.

9. Can HRA and housing loan both be claimed if I purchased house in one

city and staying in rented house in other city?

Yes, this is possible.

10. I have my own house in Bangalore, but my office is far away from that

house. If I take another house on rent near to my office & stay there &
rent out my own house; will I be able to get the HRA exemption on the
rent paid to my landlord. Whether the rent received will be added in my
income.

Yes, you can do this legally. You can give your own house on rent and live in
another rental house and get the HRA Exemption.
11. No HRA is mentioned in my salary slip, in this case what amount can I

claim as HRA exemption.

Ask your HR about HRA allowance. Then and only you can claim it. There is no
other loophole here.

12. For HRA Exemption what is definition of salary? Is only Basic or Basic

plus DA?

It is Basic Salary and not the Basic plus DA.

13. Is exemption of HRA come under 1 lakh slot section 80C?

No. HRA is different than 1 Lakh slot of Section 80C. HRA comes under Section
10 (13A) of the Income Tax Act.

If an employee owned a house through Loan and he is also paying interest for
the housing Loan. The house and office both are located in the same place. Can
he/she get the following benefits
a) Housing loan principle amount
b) House Loan interest amount
c) HRA

Yes, you can claim all of the above 3 benefits. This is because you own your
own house but living in the rental house so you can get all of the above 3
Income Tax Exemptions. It’s really a smart move.

14. Is there any expenses are allowable for notional rent income?

Yes, 30% of the income you can deduct as the expenses

15. I have a house property, which is co-owned by me, my mom and dad. I had

a home loan which i have prepaid it and closed it.

Now, if i want to claim HRA in my salary, do i need to transfer my
ownership or i can still claim HRA on the same house?

You are the one of the owner of the house so you are not eligible for the HRA
Exemption.