House Rent Allowance is a special allowance granted to an employee by his employer towards payment of rent for residence of the employee. In this article, we will discuss each and every aspect related to HRA exemption provided in Income Tax. HRA exemption calculator is also being provided for ease of Tax Payers.
HRA Exemption is provided under Section 10(13A) as least of following three:
a. HRA Actually Received
b. Rent Paid- 10% of Salary( Basic Salary + DA)
c. 50% of Salary if living in Metro Cities (Delhi/Mumbai/Chennai/Kolkata) or 40% in case of living in other cities as the case may be.
a. HRA Exemption is not available if Person is living in his own house or not paying rent.
b. It may be noted that HRA Exemption need to be calculated month-wise if there is change in any of the attributes as mentioned above during the Financial Year.
c. For Payment of Rent to Family members including Parents, HRA exemption can be claimed if he proved that he has actually paid rent.
d. NCR Cities are considered Non-Metro for HRA Exemption.
Whether Maintenance Cost will be Considered as Rent for HRA Exemption
It is commonly asked query by the taxpayers that whether they can claim exemption for payment of monthly maintenance charges to society.
As per Section 10(13A) of Income Tax Act, exemption is available for payment of Rent to the Landlord. Now important question is what is rent. In the opinion of Team Fab Gyan, maintenance charges, electricity charges, club charges etc. can’t be considered as Rent if paid separately.
However, if Rent is inclusive of maintenance charges and maintenance charges are paid as part of Rent to Landlord (component of maintenance charges is not separately identifiable in agreement) and Landlord is paying maintenance charges to RWA or Builder, exemption cannot be denied under section 10(13A) and Tax Payer can claim exemption for Rent inclusive of maintenance charges.
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Disclaimer: Though every effort is being made to present correct interpretation of Law, however it is advised that Readers may consult their Tax Consultant before reaching to any conclusion.