HRA means House Rent Allowance is an amount which is paid to employees by their employers as a part of their salaries. The purpose of this rent allowance is to meet the cost of living in a rented accommodation. The HRA is regulated by the provisions of Section 10(13A) of the IT Act. HRA is a biggest advantage is for a person to claim an annual deduction of Tax. The decision of HRA is based on the different criteria such as the salary of the employer and the city of residence.
|Basic salary||This is an annual amount paid to the employee without any allowances|
|Dearness allowance||It is an allowance paid to government employees, public sector employees (PSE) and pensioners in India|
|HRA Received||It is a part of the salary given to employee to pay house renting expenses|
|Total house rent paid(P.A)||Total house rent paid by the employee|
|Actual HRA Received||It is a part of the salary given to employee to pay house renting expenses|
|Amount of exempted HRA||It is an amount which is free from to HRA|
|HRA chargeable to Tax||It is an amount which is chargeable to tax|
HRA Calculation depends on the several factors like if they are living in a METRO city then 50 % of their basic salary or if they are living in a NON-METRO city then 40 % of their basic salary.
In case if you stay with your parents, you are eligible to pay rent to your parents and collect a receipt for HRA claim but you cannot be either owner or co-owner of the particular property in which you are living and claiming HRA.
The HRA can be fully or patially free from tax. Those employees who get salary from the employes can claim HRA benefits that depend on the city in which you are living is either METRO city or NON-METRO city.
The person who is salaried and also living in a rented house can claim HRA tax exemptions.
HRA provides important information about the human capital to the organisation enabling executives to take right decisions in respects of recruitment, promotions, transfers etc.
The 3 rules of HRA tax exemption are as below: