Tax Deduction on HRA
For any salaried person, one of the major worry is how to calculate the tax deduction available on the HRA - House Rent Allowance. This is especially true when you have no help around like a CA friend. And, when you ask many people, you end up with so many conflicting versions that result in more confusion.
The amount of HRA exempt is the least of these:
The actual amount of allowance received by the assessee in the relevant period during which the rental accommodation was occupied by him The amount left after deducting one-tenth of the assessee's salary for the relevant period from the actual rent paid by him In case the house is in Mumbai, Calcutta, Delhi or Chennai, 50 percent of the salary of the assessee in the relevant period In case the house is in any other place, 40 percent of the salary of the assessee in the relevant period
Calculating HRA
The deduction is available only for the period during which the rented house is occupied by the employee and not for any period after that. For example, during the year 2008-09 , assume an assessee resides in Bangalore and gets a salary of Rs 8 lakhs as basic and Rs 3 lakhs as HRA. He pays an actual rent of Rs 2.4 lakhs.
In this case, the amount of HRA exempt would be:
Actual HRA received: Rs 240,000 Excess of rent paid over 10 percent of salary, i.e., Rs 2.4 lakhs less Rs 80,000: Rs 1.6 lakhs 40 percent of salary (as the accommodation is in Bangalore), i.e., 40 percent of Rs 8 lakhs: Rs 3.2 lakhs. As, out of these, Rs 1.6 lakhs is the least, it will be allowed as a deduction from salary for the year.
This is an extract from an article in the Economic Times, which gives details about how to understand the HRA component of your payslip.
Happy reading...
The amount of HRA exempt is the least of these:
The actual amount of allowance received by the assessee in the relevant period during which the rental accommodation was occupied by him The amount left after deducting one-tenth of the assessee's salary for the relevant period from the actual rent paid by him In case the house is in Mumbai, Calcutta, Delhi or Chennai, 50 percent of the salary of the assessee in the relevant period In case the house is in any other place, 40 percent of the salary of the assessee in the relevant period
Calculating HRA
The deduction is available only for the period during which the rented house is occupied by the employee and not for any period after that. For example, during the year 2008-09 , assume an assessee resides in Bangalore and gets a salary of Rs 8 lakhs as basic and Rs 3 lakhs as HRA. He pays an actual rent of Rs 2.4 lakhs.
In this case, the amount of HRA exempt would be:
Actual HRA received: Rs 240,000 Excess of rent paid over 10 percent of salary, i.e., Rs 2.4 lakhs less Rs 80,000: Rs 1.6 lakhs 40 percent of salary (as the accommodation is in Bangalore), i.e., 40 percent of Rs 8 lakhs: Rs 3.2 lakhs. As, out of these, Rs 1.6 lakhs is the least, it will be allowed as a deduction from salary for the year.
This is an extract from an article in the Economic Times, which gives details about how to understand the HRA component of your payslip.
Happy reading...
Labels: Tax Matters
posted by Bigyan Satpathy at 6:20 PM
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