House Rent Allowance or HRA is provided by employer to their employees as a part of their salary. HRA comes under section 10(13 A) of the Income Tax Act in accordance with rule 2A of Income Tax Rules.
If you stay in rented house you can claim exemption in your HAR under Income Tax Act.
According to Income Tax Rule you can calculate your HRA.
Rule 1: 50% of your Annual Basic Salary for Metro city.
40% of your Annual Basic Salary for Non Metro city.
Rule 2 : Actual HRA provided by your employer.
Rule 3 : Actual Rent Paid - (10% of Annual Basic Salary).
Out of the three result you can claim exemption the least amount in your HAR under Income Tax Act.
If you paid more than Rs 1,00,000 in that case you have to submit your landlord's Pan Card number. And if he is not ready to provide you his Pan card number then you can submit a declaration form stating that he don't have a PAN card with his signature.
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| How To Calculate HRA For Income Tax? |
So, below are steps to calculate your HRA.
For example:
Basic Salary = Rs 10,000 per month
HRA = Rs 5,000 per month
Rent = Rs 8,300 per month
According to 1st Rule :
Metro City : 50% of Annual Basic Salary
(10,000 *12) of 50/100 = Rs 60,000
Non Metro City : 40% of Annual Basic Salary
(10,000 *12) of 40/100 = Rs 48,000
According To 2nd Rule :
Actual HRA provided by your employer :
5,000 * 12 = Rs 60,000
According To 3rd Rule :
Actual Rent Paid - (10% of Annual Basic Salary).
(8,300 * 12) - (10% of 10,000 * 12)
= 99,600 - 12,000
= 87,600
Least amount for Metro city people is Rs 60,000
Least amount for Non Metro city people is Rs 48,000
I hope this article will help you to understand the process of HRA calculation.
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