House Rent Allowance or HRA: Rules,Calculation & Exemption!

Through this blog we shall give a detailed analysis on House Rent Allowance or HRA, rules related to HRA and HRA Exemption.

If you are a salaried employee, you might be receiving your monthly salary slips consisting of various components that form part of your Total monthly salary.

Have you ever wondered what does the small component of your salary known as “House Rent Allowance or HRA” exactly means.

Here we shall be highlighting all the aspects related to House Rent Allowance or HRA in a simple manner, that shall help you in understanding this small but very important part of your salary.You will probably get answers to all your queries regarding House Rent Allowance.

What is House Rent Allowance or HRA ?

House Rent Allowance or HRA is an allowance paid by an employer to his employees for meeting their rent expenses in relation to accommodation taken for residential purpose only.The amount of HRA is decided by the employer based on the salary of the employee and the city of residence i.e. the employee is staying in one of the metro cities or some other city.

HRA provides additional tax benefit to the employees i.e.if you are a salaried person, you can save some of your taxes if HRA forms part of your salary.

Keep reading further to know about these tax benefits…

 

HRA rules, HRA exemption, HRA, House rent allowance

House Rent Allowance or HRA : Important points

  • HRA or House Rent Allowance is available only to salaried individuals. So, the tax benefit related to HRA can also be claimed by salaried persons only.
  • Self employed professionals, businessmen etc.cannot claim the HRA exemption under Section 10(13A). But,they can claim Deduction for house rent under section 80 GG subject to certain conditions.
  • HRA exemption is available if an employee stays in a rented accommodation during the period for which he is claiming exemption.
  • If you stay in your own house and are not paying any rent, you are not eligible to claim the HRA Exemption.
  • You must have actually incurred the rent expenditure i.e. you must have actually paid the rent.
  • If rent paid during the financial year exceeds Rs.1 lakh or Rs.8333 per month, the employee has to furnish the Name, Address and PAN of the landlord.
  • Claiming HRA Exemption is a good and genuine way to save some taxes for salaried employees.

For additional tips,do refer our popular blog post Tax Saving tips for salaried individuals.


House Rent Allowance/HRA Exemption : Section 10(13A)

You can claim an HRA exemption U/s 10(13A) of The Income Tax Act,1961.

The exemption will be the least of following 3 amounts:

(i) Actual HRA received from employer

(ii) Rent paid – 10% of Salary*

(iii) 50% of Basic salary (in metro cities**) or 40% of Basic Salary (in non-metro cities)

*Basic Salary here includes : Basic pay + Dearness Allowance + Commission based on turnover.

**Metro cities : Mumbai, Delhi, Kolkata and Chennai.

You should also remember that HRA is calculated on monthly basis. So,if there is any change in your Basic pay, DA, rent paid or your city of residence etc. during the year, there shall be a corresponding change in HRA exemption calculation as well.

ExampleMr. Raj works in Delhi and gets a monthly Basic salary of Rs.10000 , DA of Rs.2000 per month, HRA of Rs.4000 per month. The actual amount of monthly rent paid by Mr.Raj is Rs.5000 only.

HRA exemption will be the least of following 3 amounts:

(i) 4000*12 = 48000

(ii) (5000*12) – 10% of 144000 = 45600

(iii) 50% of 144000 i.e. 72000

Hence, Mr. Raj will get an HRA exemption of Rs.45600 from his salary income.


How to claim HRA exemption under Section 10(13A)

HRA Received                                                   XXX

Less : HRA Exemption U/S 10(13A)             XXX

Taxable HRA                                                     XXX

Hence, the balance amount after reducing the HRA exemption amount forms part of taxable income and is taxed as per Individual Income tax rates.

Continuing the above example, taxable HRA of Mr.Raj shall be as follows :

HRA Received  (4000*12) = Rs. 48000

Less : HRA exemption        = Rs. 45600

Taxable HRA                         = Rs. 2400

This Rs.2400 shall form part of taxable salary of Mr.Raj.


What are the Documents or proofs required for Claiming HRA Exemption ?

  • Rent receipts.
  • Rent Agreement.

However, no rent receipt is required if the Rent paid is less than Rs.3000 per month.

Further w.e.f June 2016, an employee has to submit Form 12BB to his employer in order to claim the exemptions like HRA, LTA etc. and Income Tax deductions under Chapter VI A.


House Rent Allowance or HRA : Common queries :

1. Can you pay rent to your parents and claim the HRA Exemption ?

Yes, you can pay rent to your parents and claim the HRA exemption provided you satisfy the following conditions :

  • If the house is registered in your parents name i.e. they are the owners of the residential house where you stay.
  • You pay rent to your parents and have proper supporting documents to justify the same.
  • Your parents should declare the rental income as part of their Total Income in their Income Tax returns.

2. Can you pay rent to your spouse and claim HRA Exemption ?

  • No, you cannot claim HRA exemption for paying rent to your wife.

3. Can you claim HRA Exemption and Home loan benefits together ?

Let us understand this by taking into consideration various scenarios :

  • If your house is self occupied i.e. you are staying in your house, you are not eligible to claim HRA exemption. But, you can claim the Home loan tax benefits.
  • You own a house but you stay in a rented accommodation in the same city : In this case,you can claim HRA Exemption only if you can justify that your office is far away from your own house. That is why you are staying in a rented house. So, you can claim both HRA and Home loan benefits.
  • You own a house but you stay in a rented accommodation in a different city : You can claim HRA Exemption if you stay in rented house due to your job location in some other city.

4. How to claim HRA exemption in case of a shared accommodation between flatmates/friends ?

In case of a shared accommodation, it is better to claim your own share only to avoid any hassles later on.

e.g. A flat is shared by 3 friends and rent paid to the landlord by each one of them. You should consider your actual share of rent paid while calculating your HRA exemption.

5. What if you switched over to a new job during the year, how to claim the HRA exemption ?

If you have changed your job during the year, you will have to consider proportionate HRA for the months for which you were employed with both the employers. Just note that you can claim HRA exemption while taking into account Salary, DA, Rent paid and actual HRA received for a total period of 12 months only (nothing in excess).

So, if you are employed with two different employers during a particular financial year, consider salary and HRA components for the number of months you were employed with each of the employers.

Let us clarify this with help of an example :

If Mr.A received HRA of Rs.5000 from Employer 1 and he shifted his job in October 2016. He receives Rs.6000 as HRA from Employer 2 from October onwards as per his new salary package. Mr.A shall take into account Rs.5000 for first 6 months and Rs.6000 for remaining 6 months while calculating his HRA Exemption.

Your House Rent Allowance shall be shown in your Form 16 issued to you by your employer. The employer shall include the HRA exemption based on the proofs and documents as provided by you for calculating your tax liability.

So,be careful while submitting all the requisite details to avoid any excess deduction of tax from your salary.

It is always advisable to submit adequate details to the employer on time. But, don’t worry even if you miss to provide the complete details to your employer and he deducts extra tax from your salary.

You can anyways claim the same while filing your Income tax return for the relevant year. For any extra TDS on your total income, you can claim for refund while filing your Income tax return.

You may also like:  LTA or Leave Travel Allowance : Know Rules, tax exemption of LTA !

So, the next time you have a look at your Salary package, Salary slip or Form 16 , you will be aware of what this House Rent Allowance signifies and how to avail the maximum benefit and save your taxes. Also, have a look at the Union Budget 2020 highlights and various new amendments. Feel free to share your valuable feedback and any queries thereupon in the comment section.

26 thoughts on “House Rent Allowance or HRA: Rules,Calculation & Exemption!”

  1. I own a property for which I claim HRA from my employer. But I don’t reside there as it is far from my office.

    I wish to part let out the house for which I am claiming HRA. and I will pay the tax from the earning by part letting out of the property.

    Please let me know whether it is legally correct to part let out the property for which HRA is being claimed from the employer.

    Reply
  2. I am a Salaried Person and I stay in a rented house. I pay Rs.60000 per month rent to my house landlord (2 Person as they are joint owners). The rent is split in 2 owners of the house. As I pay Rs 30000/- to each of the 2 person’s different bank account which is less then Rs.50000 per month limit. Is there a need of deducting 5% TDS on total rent paid by tenant? Pls guide.

    Reply
  3. I am an employee of Delhi govt. But, I am posted in Mussoorie, Uttrakhand. Then what will be my eligibility for HRA percentage.

    Reply
  4. Hi, I am in govt service. Me and my husband are staying in my parent’s home and we are paying rent to my parents. Can I get HRA exemption? Please reply.

    Reply
  5. Hi, I am living in government quarters.My salary statement shows HRA component of Rs.2505 per month in earnings and then same Rs.2505 per month as quarter’s rent in deduction column.How should I move further to calculate exemption on it?

    Reply
    • HRA exemption is for salaried individuals staying in rented accommodation. It can be claimed if HRA is a component of your salary package.

      Reply
  6. Hi, I am living in Kohima. Here in Nagaland most of the Land lord are not providing any Rent Agreement or Rent receipt.But, we are paying monthly rent on cash basis and they don’t accept bank transfer and they don’t have any PAN card.So,how can we claim HRA? Please suggest.

    Reply
  7. Hello! If an employee leaves during the month, say 22nd of October, can he claim HRA for the full month of October or it should be proportionate for 22 days or he can’t claim at all, if its for a part month? Please clarify.Thanks!

    Reply
  8. I am in railway job since 2005.At the starting of my job I did not get HRA for 18 months from January 2006 to June 2007.Can I claim for HRA now.

    Reply
  9. I am posted in Z city, but my Service book is placed at Y city and my salary also processed from Y city. So what should be the HRA rate applicable for me? Please guide.

    Reply
  10. If my wife has got a govt. accommodation in Delhi.But,I have rented a house in Gurgaon for which I am paying rent, then can I get hra from my office.

    Reply
    • Hi,I think you can get HRA from your employer.If your salary package has HRA component then you can claim this HRA exemption also.If you are living in a rented accommodation and also paying rent yourself, there may not be any issue in claiming HRA exemption from your salary income.

      Reply
  11. If I have been accommodated by employer and don’t get any allowance as a HRA. In my form 16 as a HRA 7.5% of my salary is counted. Is this amount under taxable limit or not.Please help.

    Reply
  12. This article is really helpful.You have answered all my queries related to HRA in a simple manner.Thanks a lot.

    Reply
  13. Do IAS officers or any officer from all India service get HRA allowance ? If they get govt accommodation, can they get HRA allowance on after leaving the accommodation ? Is there provision for it ? Is it the same case in transport allowance too ?

    Reply
  14. I share a common quarter provide by state government to my father. both me and my father work in same government office. Am i eligible for claiming HRA? Is it illegal to claim HRA in this situation?

    Reply
    • Hi Suraj,
      You can claim HRA only if you stay in a rented house and are actually paying rent for it.If you had been staying in a house of which your father is the owner, then also you could have paid him rent and claimed this HRA exemption.
      But,in your case you have got free quarter from your employer and are not making any rental payment, you shall not be entitled to claim HRA exemption.

      Reply
    • I’m working in Indian army, im staying in a rented house from September 2016 and didn’t apply for quarter. And now I wanted claim my hra but I could not because nac was not there so what can be done inorder to get hra from September 2016

      Reply
  15. House Rent Allowance is a good tool in case you are a salaried employee and living in a rented accommodation. You can ask your employer to restructure your salary to allow upto 40% of Basic as House Rent Allowance (50% if Metro City)

    Reply

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