Hra-a study

House Rent Allowance (10(13A) and rule 2A)-

There is a lot of queries about HRA for expert advice, So I tried to club all answers in one place.

When a salaried person gets HRA, it is regulated by rule 2A. The least of following is exempt from tax:-

50% of salary if house is situated at Mumbai, Delhi, Kolkata or Chennai or 40% except these.

HRA received by employee in respect of period during which the rental accommodation is occupied by him

The excess of rent paid over 10% of salary

Salary means Basic salary + DA (when it is part of salary for computing retirement benefits) ITO v Sr. Accounts officer, Pay & Accounts, DHBVNL (2009). It also includes commission based on fixed % of turnover achieved by an employee as per terms of contract of employment.

Many people ask, if they have home in one place and they job at other place where they have taken house on rent then Can they take this exemption? The Answer is “YES”.  There is no restriction in income tax for that. You can take exemption if you are paying rent where you are working.

Some people ask, can they pay rent to their parents or wife also.  The Answer is again “YES”.  But ITO can object on this because you are living in one home and there is no monetary transaction. Best is if they are paying rent to father/Mother/Wife then that person must show this rent income in his/her return and the rent payer must show his landlord PAN in his return. So that department can’t object on this.

A question was raised that if a person is getting 80C and 24(b) on home loan repayment and interest. Then can he claim HRA exemption. The answer is again “YES”. See first query. He can have home at one place but can pay rent where he is working for home. So there is no problem from income tax.