House Rent Allowance for Tax Exemption– H&R Block

House Rent Allowance for Tax Exemption

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House Rent Allowance for Tax Exemption

To avail full benefit of tax exemptions, a well-defined salary structure is very crucial. House Rent Allowance (HRA), if included in the salary, can help individuals save tax. In this article we will explain how tax exemptions are calculated on HRA received and certain important points to be kept in mind while calculating these exemptions.

Companies provide House Rent Allowance to employees for rented accommodation. Income tax offers tax exemptions to those employees who live on rent.  If claimed properly, House Rent Allowance can bring some tax relief to salaried individuals. The lower of the following is allowed as a deduction:

  1. An amount equal to 50% of salary when residential house is situated in Mumbai, Calcutta, Delhi or Chennai. An amount equal to 40% of salary where house is situated in any other city.
  2. House Rent Allowance received till the time employee resides in a rented house.
  3. Excess rent paid over 10% of the salary.

Some important points that must be noted while calculating these exemptions:

  1. Above exemption is available only to employees who live in a rented house.
  2. Basic Pay and Dearness Allowance are considered as salary for calculation purpose.
  3. If there is any change in the salary of the employee, house rent, rent paid and the city where house is located then the tax exemptions must be re-calculated.

If rent paid is above Rs. 1 Lakh per annum, declaring PAN of the landlord is compulsory to avail tax exemptions.

H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

 Visit hrblock.in for more information or to find your nearest office.

HRBlockIndia
HRBlockIndia
H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

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