HRA is a major part of the salary. But not many employees know how it helps in saving tax. Let us tell you how you can calculate your HRA and claim tax exemption. If you are a salaried employee then you will get House Rent Allowance (HRA). This is the main part of the salary. But not many employees know how it helps in saving tax. Let us tell you how you can calculate your HRA and claim tax exemption before filing Income Tax Return (ITR).
HRA is exempted under section 10 (13A) of the Income Tax Act. The total taxable income of the employee is calculated by deducting HRA from the total income. The amount of HRA you get from the company is not completely tax-free. In this, the benefit of HRA tax exemption is up to 50 percent of the basic salary of metro city and 40 percent of the basic salary of non-metro city residents. This benefit is also available if 10 percent of the annual income is paid as rent.
Suppose a person's monthly basic salary is Rs 15,000 and he gets an HRA of Rs 7,000 and pays rent of Rs 8,400 for accommodation in a metro city.
HRA exemption can be availed only on submission of rent receipt or rent agreement with the landlord. If the annual rent paid is more than Rs 1,00,000, then the employee has to provide the PAN number of the landlord to the employer to get the tax benefit.
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