House rent deduction in income tax section

HRA is covered under Section 10(13A) of Income Tax Act 1961. Salaried Employees who live in a Rented house can claim HRA to lower their taxes – partially or wholly.

The decision of how much HRA needs to be paid is made by employer. Part of Salary is apportioned to HRA.

1. CONDITIONS FOR CLAIMING HRA EXEMPTION?

– Salaried Individual only can claim HRA.

(Self employed cannot claim HRA.

However Self Employed can also claimdeduction of Rent paid under Section 80GG of Income Tax Act 1961.)

– Stay in Rented Accommodation

(Not living in a self owned).

– Rent paid exceeds 10% of Salary.

– HRA is a part of Salary.

(Can be seen in Form 16(B) Sr.no. 2 (e).)

– Not paying rent to spouse.

2.

HOW MUCH DEDUCTION CAN BE TAKEN?

Deduction available is least of the following:

 i. Actual HRA Received.

ii. 50% of (Basic salary + DA) for living in Metro Cities (40% for Non Metro Cities).

iii.

Actual Rent paid less 10% of Basic Salary + DA

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