Nov 192012

House Rent Allowance

Income tax department offers HRA tax exemption for those individual tax payer who stays in a rented house. Section 10(13A) of the income tax act allows the exemption of HRA. Employee can claim for HRA exemption if he or she lives in a rented house. To be eligible for claim of HRA deduction, an employee must be paying for the rent to his landlord and maintain the receipts which state that he has been paying for his rental expenditure. If an employee stays in his own house there is no tax deduction on HRA.

Following points to be considered for Calculation of HRA exemption.

1. Amount equal to 50 percent of Salary where residential house is situated in Mumbai, Delhi, Kolkatta or Chennai or Amount equal to 40 percent of Salary for other places.

2. House Rent Allowance received by the Employee

3.  Excess of Rent paid over 10% of Salary.

Salary includes Basic Salary + Dearness Allowance + Commission on fixed percentage of turnover achieved by an Employee.

Minimum of point no. 1, 2 & 3  is exempted.

For Example,

Basic Salary (Rs 5000/- per month —— Rs. 60, 000/- yearly),
Dearness Allowance (Rs. 1000/- per month —- Rs. 12, 000/- yearly).
Actual Rent Paid (Rs 2000/- per month —— Rs 24000/- yearly),
HRA received by Employee (Rs. 2000/- per month —- Rs. 24, 000/- yearly)
City: Mumbai

1.  50% of  Salary (Basic + DA) = Rs. 36,000/-

2. Rent Received = Rs. 24,000/-

3. Rent paid in excess of 10% of Salary (Basic + DA) =  Rs. 16, 800/-,

Hence, Rs. 16800/- would be exempt and the rest Rs 7,200/- would be included in gross salary for tax calculation.

Documents needed to claim HRA includes rent receipts, rental agreement, PAN details of the landlord.

Aug 302012

Income Tax Exemptions under various sections :  Assessment Year 2013-14

Sr No


Details of deductions


1 80C General deduction for investment in PPF,PF,Life Insurance, ULIP, Stamp duty on house, Fixed deposits for 5 years , bonds etc

Maximum Rs 1 ,00,000 is allowed.

2 80CCC Deduction in case of contribution to pension fund. However, it should be noted that surrender value or employer contribution is considered income. Maximum is Rs 1,00,000
3 80CCD Deduction in respect to contribution to new pension scheme. Employees of central and others are eligible. Maximum is sum of employer’s and employee’s contribution to the maximum : 10 % of salary.
5 80D Medical insurance on self, spouse , children or  parents Rs 15,000 for self , spouse & children
Extra Rs 15,000 for insurance on parents. IF parents are above 65 years, extra sum should be read as Rs 20,000
Thus maximum is Rs. 35,000 p.a.
6 80DD For maintenance including treatment or insurance of physical disable dependent relatives Rs 50,000 . In case disability is severe , the amount is Rs 1,00,000.
7 80DDB For medical treatment of self or relatives suffering from specified disease Acutal amount paid to the extent of Rs 40,000. In case of patient being Sr Citizen , amount is Rs 60,000
8 80E For interest payment on loan taken for higher studies for self or education of spouse or children Actual amount paid as interest and start from the financial year in which he /she starts paying interest and runs till the interest is paid in full.
9 80G Donations to charitable institution 100% or 50% of amount of donation made to 19 entities (National defense fund , Prime minister relief fund etc. )
10 80GG For rent paid. This is only for people not getting any House Rent Allowance. Maximum is Rs 2000 per month.  Rule 11B is method of computation.
11 80GGA For donation to entities in scientific research or rural development. Only those tax payers who have no business income can claim this deduction .Maximum is equivalent to 100 % of donation.