Calculation of Income Tax benefit available on House Rent Allowance

In terms of section 10(13A) & Rule 2A of the amended finance act 2020, a salaried person can claim the exemption in respect of House Rent Allowance received from his/her employer. The least of the following three amounts is exempt from income tax:

a) Actual HRA Received

b) 40% of Salary* (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)

c) Rent paid minus 10% of salary

* Salary = Basic + DA (if part of retirement benefit) + Turnover based Commission

Note:

1. If an HRA is received by an employee who is living in his own house or if he does not pay any rent, the HRA received is fully taxable income
2. The employee must report the PAN of the landlord to the employer if rent paid is more than Rupees one lakh (Rs.1 00,000) [ As per Income tax Circular No. 08 /2013 dated 10th October 2013].
3. HRA paid cannot be more than 50% of an employee’s basic salary.
4. An employee can claim the House Rent Allowance (HRA) exemption as above for the payment of rent made to his/her parents and collect a receipt for the HRA claim. However, similar rules don’t allow him/her to pay rent to spouse and claim a tax exemption.
5. In case your landlord is an NRI, you must deduct 30% tax from the rent amount that needs to be declared
6. The salaried person who opts for the new regime under section 115BAC is not eligible to claim deductions on the House rent allowance

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INCOME TAX SLABS FOR FY 2024-25: TAX DEDUCTIONS AND REBATES EXPLAINED	KNOW TDS ON CASH DEPOSIT WITHDRAWALS AND OTHER CASH TRANSACTIONS	INCOME TAX DEPARTMENT HAS NOW ROLLED OUT NEW FUNCTIONALITY IN AIS
INCOME TAX DEDUCTION AND REBATE AVAILABLE ON HOUSING LOAN	CALCULATION OF INCOME TAX BENEFIT AVAILABLE ON HOUSE RENT ALLOWANCE	DO YOU KNOW THESE INCOMES ARE FULLY EXEMPT FROM INCOME TAX

[Nearly, 104 amendments are made either by amending/omitting existing sections or by insertion of new sections. In this article, the amendments, which are most relevant to salaried persons, are covered below.]

1	List of employee benefits not included under the head of Salaries for the tax treatment
2	How to calculate tax relief on salary arrears under Section 89(1)?
3	The tax calculation for Concessional or interest-free loans are given by an employer
4	Calculation of Income Tax benefit available on House Rent Allowance
5	Calculation of tax components on the perquisite value of rent-free unfurnished/furnished accommodation/hotel charge
6	Perquisite value of motor car expenses paid/reimbursed by the employer
7	Income Tax treatment in case of provided with medical benefit
8	What is the tax exemption limit for Transport allowance, Conveyance allowance, and Relocation Allowance?
9	Income Tax Benefit on LTA/LTC under section 10(5)
10	Tax benefits for working in a hilly area, tribal area, border area, and disturbed areas
11	Tax benefits for working in a hilly area, tribal area, border area, and disturbed areas
12	Tax benefits on retirement, VRS, and retrenchment of salaried persons
13	What is capital gain and how capital gain tax has arrived?
14	Tax deduction benefits on the standard deduction, entertainment allowance, and employment/professional tax from salary
15	The taxable value of perquisite in respect of “sweat equity shares” or ESOP
16	What are the tax benefits under NPS?
17	Do you know these incomes are fully exempt from Income tax?
18	What happens to your tax liability when you opt for a new tax regime?
19	Do you know the incomes that are exempted from income tax even in the new tax regime?
20	Do you know these incomes are fully exempt from Income tax