How to calculate tax exemption on HRA under section 10 (13A) and under section 80GG

 How to calculate tax exemption on HRA.

HRA for salaried class people is accounted as under section 10 (13A) of the Income Tax Act 1961 modified from time to time during budget, in accordance with rule 2A of Income Tax rules. Similarly, self-employed individuals taxpayers are not considered for HRA exemption under this section, but they can claim tax benefits under section 80GG of Income Tax Act 1961.

House rent allowance or HRA is a Income tax exemption available to individual taxpayers as part of their salary package. The HRA component of salary slip can be claimed only when the taxpayer has actually paid rent for the residential accommodation availed.

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How to claim rebate on arrear salary under section 89(1).

Calculation of HRA rebate under section 10 (13A)

 

It’s not necessary that you may be able to claim the full HRA amount as HRA rebate under section 10 (13A), the amount may less than HRA paid but it may not above the HRA paid. The amount you can claim as exemption from income tax will be the lowest of the following three: 

a) HRA amount in CTC,

b) 50% of the addition of basic salary, DA and commissions (basic+DA+commissions) for those living in metro (40% for those in non-metros)

c) Rent actually paid to landlord minus 10% of basic+DA+commissions. 

Any amount exceeding the calculated amount, either in the form of remaining HRA received or excess rent paid to land lord, will be added to your total income for taxation purpose. House rent allowance or HRA can even be claimed by paying rent to parents or spouse if you do not have any ownership in the house ie the property is not owned party or fully by tax payer. HRA rebate under section 10 (13A) as given by the tax deducting or salary disbursement authority. 

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Benefits of filling Income Tax Returns

Calculation of HRA Deduction under Section 80GG

HRA Deduction under Section 80GG for non-salaried people or self-employed is the least among the bellow three 

a) ₹5,000 per month, 

b) Total rent paid is deducted from 10% of basic salary 

c) 25% of total taxable income calculated after claiming tax deductions under 80C to 80U, income from dividends and long and short-term capital gains (LTCG & STCG). 

This is to be claimed only while filing Income Tax Return (ITR).That means the salary disbursement authority can't give rebate under Section 80GG. Deduction under Section 80GG is allowed only two those employees where there is no specific HRA paid in their salary/income.

SIMILAR STORIES:

8 source of Income exempt from Income Tax:

This article is for educational purposes. If any confusion arrives in calculation of HRA rebate under section 10 (13A) or Calculation of HRA Deduction under Section 80GG, the latest income tax rules should referred or Practicing CA may also consulted. 

SIMILAR STORIES:

New income tax rule changes applicable from 1 April 2022 as per Finance Bill 2022.