The annual salary an employee gets from his employer is divided into various components. The component that is paid for renting an accommodation is known as the House Rent Allowance or HRA. HRA is paid to an employee over and above his basic salary.
What is HRA?
HRA is the part of your salary which is paid to make rent payments. In other words, a house rent allowance is the compensation paid by the employer for the rent paid by their employees to live in the place of employment.
How much HRA do I get?
In case you work in a metropolitan city, 50% of your basic salary will be paid as the HRA. In any other city, the HRA will be 40% of your basic salary.
Is HRA paid if I don’t live in a rented home?
The HRA part of the salary is paid assuming that the employee does not own a house and must rent a property for accommodation due to his employment. HRA will still be paid if you live in your own home. However, since there is no actual rent payment, the entire HRA component will come taxable.
Is HRA taxable?
Yes, depending on whether or not you live in a rented accommodation and the rent amount paid, HRA may be partially or fully taxable.
HRA tax exemption
HRA tax exemption is available under Section 10(13A) of the income tax act.
Conditions to Section 10 (13A) benefit
* Only salaried individuals can claim deductions.
* HRA should be part of your salary package.
* You should actually be living in a rented accommodation in the city where you work.
* The deduction is available only for the period during which the accommodation is occupied by the taxpayer. * The tenant must provide rent payment receipts.
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