Calculate House Rent Exemption from Income Tax under Section 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]
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.
1.The exemption shall be calculated on the basis of where the accommodation is situated.
2.If place of employment is the same for the whole year, then exemption shall be calculated for the whole year.
3.If there is a change in place during the previous year, then it shall be calculated on monthly basis.
4.Exemption 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 

Actual amount of HRA received

50% (for Chennai, Mumbai, Kolkata and Delhi)/40% (for other places) of the Salary for the relevant period

Rent paid Less 10% of Salary for the relevant period. 

Click here to Download the HRA Calculator in Excel 

Leave a Reply

Your email address will not be published. Required fields are marked *