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Material in this Short Article.
Computation and Taxability of House Rent Allowance (HRA)
Home Lease Allowances is provided by the employer to the staff member to meet the expenses in connection with Lease of the accommodation which the worker might need to take. Home Rent Allowance is taxable under the head salary to the extent it is not exempt under area 10(13 A) of the Act.
Exemption of H.R.A.
House lease allowance is exempt under section 10(13 A) check out with rule 2A, to the level of the minimum of The following 3 amounts:
( a) Real HRA gotten by the worker in respect of the “Appropriate Duration”
( b) Excess of rent paid for the accommodation inhabited by him over 10% of the income for the “Appropriate Duration” (Lease Paid -10% Wage)
( c) 50% of wage where the accommodation is positioned at Mumbai, Calcutta, Delhi or Chennai and 40% Of wage where your home is located at any other location for the “Relevant Period”
The minimum of the above 3 amounts shall be exempt from tax and the balance will be taxable and thus included in the gross salary of the worker.
Condition: Under Sec 10(13 A) a staff member who is in invoice of House Rent Allowance can declare exemption, if he does not reside in his own home, and pays lease in excess of 10% of his salary for his residential accommodation.
No entitlement of exemption: In the following cases, exemption of HRA is not available to staff member:–LRB- .
( a) When a worker stays in his own home.
( b) When a staff member does not pay any rent or incur any expense towards lease.
( c) When the lease paid is less than 10% of income.
Relevant Period: Pertinent duration means the period throughout which the said accommodation was occupied by the Employee during the previous year.
Significance of Wage: Overall
- Basic Wage
- Dearness Allowance (if forming part of retirement advantages)
- % based commission on turnover.
Elements impacting exemption: Exemption of HRA relies on the list below elements:
( a) Wage of the employee (b) HRA Gotten (c) Lease Paid (d) Place of Residence
Where these four aspects continue to be same throughout the year, the exemption u/s 10(13 A) ought to be calculated
On “Yearly basis”. If there is any change in respect of any of the above factors then computation need to be done in “Regular monthly basis”
Significance of H.R.A:-
If any allowance is given for House rent than it is called H.R.A.
Exemption of H.R.A. Under Area 10(13 A) & Rule 2A:- If Staff member receive H.R.A. than it will be taxable under section 10(13 A) & Guideline 2A as under-
|A||Actual H.R.A. gotten|
|B||Rent Paid– 10% of Wage|
|C||40% and 50% of Income|
|Which ever is less|
Note-1 40% and 50% is depends upon Rental location not on location of service
Note-2 50% of wage where the accommodation is situated at Mumbai, Calcutta, Delhi or Chennai and 40% Of income where your house is situated at any other location.
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