What are the Tax Exemptions for Salaried Employees who receives HRA

What are the Tax Exemptions for Salaried Employees who receives HRA


Company will pay salary to its employees on monthly basis. This salary includes several allowances and perquisites. One such allowance is called House Rent Allowance ( HRA ). Basically this is paid to employees to meet the cost of residence. If any amount is spent towards the rent then you can claim tax exemption. It is a common practice that companies require their employees to submit the proof of payment of rent for calculating the amount exemption for TDS purpose.

A. TAX EXEMPTION: For Salaried Employees who receives HRA

1. Tax Exemption U/s 10(13A) : The calculation to quantify the amount of exemption is as follows :
  • Actual HRA Received.
  • Annual Rent paid ( - ) 10% of (Basic + DA )
  • 40% of ( Basic + DA ) { 40% can be substituted with 50% for metro cities )
2. Key Notings:

Eligible Persons : Salaried employees who are in receipt of House Rent Allowance.

Living with Parent : If you are living with your parents and paying rent to your parents, then also you can tax exemption. But the rent received by your parent will be taxed in their hands.

Rent paid for Spouse : The IT dept won’t allow the claim if you paid rent for your spouse separately.

Combination of HRA and Housing Loan Interest : If you are not staying in your own house due to any reason you can claim HRA as well as Housing Loan Interest. Then own property should be declared as rented one and should declare the rent received on such property. If your parents living in the property then you can claim it as self occupied.

Non availability of Landlord’s PAN: It is mandatory to declare the PAN of the House owner to your employer if you are paying an annual rent of Rs. 1 Lakh. There is no way around this.

Forgot to submit rent receipts to employer : No need to worry one can claim this exemption at the time of filing Income tax return for the respective year. But you have to take of calculating the amount of exemption and this amount should be reduced from the figure appearing in the Form 16 under the head “Income chargeable under the head Salaries”

B. TAX DEDUCTION U/s 80GG: Many persons do not aware of this provision as it is introduced into Income Tax Act, 1961 recent years.

Key Notings:

Eligible Persons: Individual or HUF being salaried employee who are NOT receiving House Rent Allowance and SELF EMPLOYED PERSONS.

Quantum of Deduction : The amount of deduction should be LEAST of the following –
  • Rs. 5000 per month
  • Rent paid (minus) 10% of Total Income
  • 25% of the Total Income
Conclusion of the Blog:
From the above most frequent doubts are clarified with decent explanations. So now the HRA exemption is not only available to salaried employees but also to the persons who are not receiving such of allowance.

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