HRA & Tax Calculation.....!!!





HRA stands for House Rent Allowance, it is an allowance provided by an employer to an employee. The main intention of this is to meet the cost of renting a home. Everybody whose salary package includes HRA is potentially eligible to get some deduction in Income Tax. Most, of the government and private employees have HRA as part of their salary package. In order to get income tax deduction for HRA, you must be paying rent for your accommodation; merely receiving HRA won̢۪t help you to get tax benefit.





Are you eligible for deduction under HRAâ€Â¦..??? We have designed and prepared this article to make you understand how you can claim tax deduction for HRA and what is the maximum tax exemption limit allowed for that. You can get tax deductions on HRA only if you are paying a rent of more than 10% of your salary. In majority cases, the rent, especially in cities is well above salary. For the purpose of discussion on HRA, salary means your Basic Dearness Allowance (DA).





How to claim HRA...???

You can claim HRA if you fulfill the following three conditions:

You should have an HRA allowance as part of your salary package.

You must be staying in a rented house and paying rent for it.

Rent should exceed 10% of your salary.





What is the maximum available deduction on HRA...???

The actual HRA entitled to get tax exemption will be the least of the following.

The actual amount of HRA received.

40% of salary. This increases to 50% if you are staying in Chennai, Delhi, Kolkata or Mumbai.

Rent paid minus 10% of Salary (Basic Dearness Allowance)