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HRA - Income Tax Provisions and HRA Chargeable for Income Tax

The amount of HRA exemption is deductible from the total income before arriving at a taxable income. This helps the employee in saving tax. As per the Income Tax Rules / Provisions the HRA received is fully taxable if an employee is living in his own house or if he does not pay any rent.

HRA - Income Tax Provisions

Exemption in respect of House Rent Allowance (HRA) is available to employees for the period during which rental accommodations is occupied by the employee. An employee can save upto 50% of salary if resides in Metro (40% of salary if resides in non-metro).

As per Income Tax Act Section 10 (13A) and rule 2A exemption in respect of house rent allowance is least of the following:-
1. Rent paid in excess of 10% of basic salary.
2. Actual HRA received by the employee.
3. 40% of Salary in Non Metro Cities(50% in case of Metro Cities)

Salary for this purpose is Basic Pay + DA forming part + commission on sale on fixed rate.

Metro Cities: Cities like Delhi, Mumbai, Chennai and Kolkata constitutes Metro. Non Metro Cities: All cities other than these are non-Metro. So if you resides in cites like Gurgaon, Faridabad, Bangalore, Hyderabad, Pune, Chandigarh, Ahmedabad etc it would constitutes as non metro and only 40% deduction will be allowed.

Calculate HRA Exemption and Taxable Amount

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