10(13A) Tax Rebate

The allowance your employer pays you for house rent does not form part of your taxable income. Housing Rent Allowance or HRA has income tax exemptions. Section 10(13A) lays down rules for calculation of HRA exemption.

Eligibility for 10(13A) rebate

Most importantly, HRA exemption is available only if you are staying in a rented accommodation. You must not be staying in a house owned by you in order to claim HRA exemption. Rental receipts must be strictly submitted to the HR every financial year for getting exemption on rent allowance.

Maximum exemption limit under 10(13A)

Calculating HRA rebate

Maximum income tax exemption on house rent would be the least of:

-  Actual HRA

-  Actual rent less 10% of salary

-  40% of salary (50% of salary in the metros)

Salary refers to basic salary, DA and fixed commissions only and excludes all other allowances and perquisites.

If your actual rent is less than 10% of salary then your exemption would be nil.

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Examples for HRA tax benefit calculation

  1. Suppose your monthly house rent comes to Rs 12,000, your HRA is Rs 11,000 and your salary is Rs 40,000. Maximum limit of exemption under 10 (13A) would be Rs 8,000 (=12,000 - 4,000) since that works out to be the least.
  2. In the above illustration if your monthly house rent is Rs 15,000, the maximum tax exemption on house rent would be Rs 11,000.

In case your house rent is greater than HRA your 10(13A) exemption is maximized when your HRA is 50% (or 40%) of your basic pay. If instead your house rent is less than HRA request your HR to make HRA equal to actual rent and increase your basic pay. Provide rental receipt to your HR on time and they will apply less TDS on your salary. Pay your rent preferably by cheque.

Owning a house does not make you ineligible to claim HRA exemption. You should not be living in that house, or simply put you should be actually paying rent for your accommodation. You could be eligible to claim both HRA tax rebate and home loan tax benefits as long as you satisfy conditions for both these separately.

Finally, if you do not receive HRA you can still get tax deduction on the rent paid through provisions in section 80GG.

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