Tax Treatment: Minimum of the following is exempted from tax: 1. Actual HRA received. 2. 50% of salary (when house is situated in a metro city) or 40% of salary (when house is situated in any other place)
3. The excess of rent paid over 10% of salary.
NOTE . Salary here means: Basic + D.A. (if it forms a part of retirement benefit) + Commission as a fixed % on turnover.
a) Salary shall be determined on due basis for the period for which the employee occupies rented accommodation in the previous year and gets HRA. b) Exemption is not available if employee lives in his own house, or in a house for which he does not pay any rent. c) For criteria of 50% or 40% of salary as deduction, place of employment is not significant but place where the house is situated is important. d) Deduction from HRA depends on Salary of the employee, Amount of HRA, place of residence (not place of employment), rent paid by the employee.
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