House Rent Allowance (HRA) is a component of salary provided by employers to employees to cover the cost of renting a home. The HRA exemption helps employees save on taxes by reducing their taxable income by the amount spent on rent, subject to certain conditions.
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Which provisions of the Income Tax Act 1961 prescribe HRA Exemption?
Section 10(13A) of the Income Tax Act 1961 read with Rule 2A of the Income Tax Rules prescribe for HRA Exemption and the extent to which the HRA is exempted.
Limit of HRA Exemption
The amount of HRA which is exempted is least of the following:
a. actual amount of HRA received by the assessee or
b. rent actually paid in excess of 10% of Basic Salary or
c. In case of Bombay, Calcutta, Delhi or Madras, 50% of Basic Salary & in case of any other place 40% of Basic Salary
You may try the calculator for calculating HRA Exemption above.
Is HRA Exemption allowed in New Scheme opted under section 115bac?
New scheme under section 115bac specifically disallows HRA Exemption, therefore, HRA Exemption is not available if some one opts for New Scheme.
HRA Exemption Calculator