Is there any word actual HR in HR payroll? I got this doubt when I was searching for rentreceipt for HRA claim, if actual HRA is there what is the percentage of that, and it will be on gross or basic salary? Looking forward for a reply.
Thank you
From India, Hyderabad
Thank you
From India, Hyderabad
Hi Padma There is nothing as Actual HRA. HRA is calculated 40% on the basic and there is no any strict rule of that. It is just to reduce the Income Tax of the employees.
From India, Bangalore
633From India, Bangalore
Dear Padma,
I think you are referring to the tax benefit paragraph of HRA.
HRA is usually given by employers as 40% of basic + da (50% for metro cities)
However there are many employers who would give you more than the statutory requirement.
Actual rent is the rent that you pay to the landlord.
So tax benefit is on minimum of the foll 3.
1. Actual HRA given (the amount that is paid to you and is reflected in your salary)
2. 40% (or 50%) of Basic + da
3. Rent paid - 10% of (Basic + da)
From India, Mumbai
I think you are referring to the tax benefit paragraph of HRA.
HRA is usually given by employers as 40% of basic + da (50% for metro cities)
However there are many employers who would give you more than the statutory requirement.
Actual rent is the rent that you pay to the landlord.
So tax benefit is on minimum of the foll 3.
1. Actual HRA given (the amount that is paid to you and is reflected in your salary)
2. 40% (or 50%) of Basic + da
3. Rent paid - 10% of (Basic + da)
From India, Mumbai
Dear Jeevarathnam ji and Dear Ankita ji,
Please be noted that HRA is not compulsory to pay except in some States there is a Law by which there is an obligation on employer to pay the HRA under certain conditions.There is no Law that compel the employer to pay HRA 40% or 50%.
Payment of HRA to employee and taking exemption by employee of this payment under Income Tax are two saperate issues.
From India, Mumbai
Please be noted that HRA is not compulsory to pay except in some States there is a Law by which there is an obligation on employer to pay the HRA under certain conditions.There is no Law that compel the employer to pay HRA 40% or 50%.
Payment of HRA to employee and taking exemption by employee of this payment under Income Tax are two saperate issues.
From India, Mumbai
Dear Padma,
1. How is HRA accounted for in the case of a salaried individual and a self-employed professional?
HRA is accounted for in the case of salaried people under Section 10 (13A) of Income Tax Act, 1961, in accordance with rule 2A of Income Tax Rules. On the other hand, self-employed professionals cannot be considered for HRA exemption under this act, as they do not earn a salary. However, they can claim benefits on the house rent expenses incurred under section 80GG, which resembles section to 10 (13A) but is subject to certain conditions.
2. What are the dependent factors in calculating HRA for the salaried individual?
When you are calculating HRA for tax exemption, you take into consideration four aspects, which include salary, HRA received, the actual rent paid and where you reside, i.e. if it is a metro or non-metro city. If these aspects remain constant through the year, then tax exemption is calculated as a whole annually, if this is subject to change, as in a rent hike, pay hike or shift in residence etc., then it is calculated on a monthly basis. It is usually rare for all the values to remain constant in a financial year.
The place of residence is significant in HRA calculation as the tax exemption for HRA in a metro city is 50 per cent of the basic salary, while that for non-metro cities is 40 per cent of the basic salary. This holds true especially when you work in a metro city, but reside in a non-metro city. In this case, only your city of residence will be considered for calculating your HRA.
3. Can I pay rent to my parents or spouse to avail HRA benefits?
You can pay rent to your parents. But, your parents will then need to account for the same under ’Income from other sources’ and will be entitled to pay tax for the same.
However, you cannot pay rent to your spouse. In view of the relationship when you take up residence together, such a transaction does not bear merit under tax laws. Sham transactions can only spell trouble under scrutiny; so steer clear of these.
4. Do I need to submit any proof for my HRA claim?
You need to submit proof of rent paid through rent receipts, once at the beginning of the year and once towards the end of the financial year. It should have a one rupee revenue stamp affixed with the signature of the person who has received the rent, along with other details such as the rented residence address, rent paid, and name of the person who rents it.
4. How do I calculate my HRA?
To figure out how much HRA exemption you are eligible for, consider the following three values:
a. The actual rent allowance that the employer provides you as part of your salary
b. The amount of rent you pay for your house in excess of 10 per cent of your basic pay
c. 50 per cent of your basic salary, when you reside in a metro city or 40 per cent if you reside in a non-metro city.
The least value of these three values is allowed as tax exemption on your HRA. You can discuss restructuring your pay structure with your employer in order to avail the most of your HRA tax benefit.
Here is a sample illustration for your understanding:
Sunitha earns a basic salary of Rs 40,000 per month and rents an apartment in Delhi for Rs 20,000 per month (hence eligible for a 50 per cent of the basic pay for HRA exemption). The actual HRA she receives is Rs 25,000.
These values are considered to find out her HRA tax exemption:
a. Actual HRA received, i.e. Rs 25,000,
b. 50 per cent of the basic salary, i.e. Rs 20,000,
c. Excess of rent paid over 10 per cent of salary, i.e. Rs 20,000 minus Rs 4,000 is Rs 16,000
The value considered for her actual HRA exemption will be the least value of the above figures. Hence, the taxable HRA amount for Sunitha per month will be Rs. 25,000 – 16,000 (available HRA deduction) = Rs. 9,000.
5. Can I simultaneously avail tax benefits on my home loan and HRA?
The tax benefits for home loan and HRA are two separate entities and have no direct bearing on each other. As long as you are paying rent for an accommodation, you can claim tax benefits on the HRA component of your salary, while also availing tax benefits on your home loan. This could be the case if your own home is rented out or you work from another city etc. However, you need to account for any rental income you receive from the property you own under income from other sources.
Regards,
NArayana
From India, Hyderabad
1. How is HRA accounted for in the case of a salaried individual and a self-employed professional?
HRA is accounted for in the case of salaried people under Section 10 (13A) of Income Tax Act, 1961, in accordance with rule 2A of Income Tax Rules. On the other hand, self-employed professionals cannot be considered for HRA exemption under this act, as they do not earn a salary. However, they can claim benefits on the house rent expenses incurred under section 80GG, which resembles section to 10 (13A) but is subject to certain conditions.
2. What are the dependent factors in calculating HRA for the salaried individual?
When you are calculating HRA for tax exemption, you take into consideration four aspects, which include salary, HRA received, the actual rent paid and where you reside, i.e. if it is a metro or non-metro city. If these aspects remain constant through the year, then tax exemption is calculated as a whole annually, if this is subject to change, as in a rent hike, pay hike or shift in residence etc., then it is calculated on a monthly basis. It is usually rare for all the values to remain constant in a financial year.
The place of residence is significant in HRA calculation as the tax exemption for HRA in a metro city is 50 per cent of the basic salary, while that for non-metro cities is 40 per cent of the basic salary. This holds true especially when you work in a metro city, but reside in a non-metro city. In this case, only your city of residence will be considered for calculating your HRA.
3. Can I pay rent to my parents or spouse to avail HRA benefits?
You can pay rent to your parents. But, your parents will then need to account for the same under ’Income from other sources’ and will be entitled to pay tax for the same.
However, you cannot pay rent to your spouse. In view of the relationship when you take up residence together, such a transaction does not bear merit under tax laws. Sham transactions can only spell trouble under scrutiny; so steer clear of these.
4. Do I need to submit any proof for my HRA claim?
You need to submit proof of rent paid through rent receipts, once at the beginning of the year and once towards the end of the financial year. It should have a one rupee revenue stamp affixed with the signature of the person who has received the rent, along with other details such as the rented residence address, rent paid, and name of the person who rents it.
4. How do I calculate my HRA?
To figure out how much HRA exemption you are eligible for, consider the following three values:
a. The actual rent allowance that the employer provides you as part of your salary
b. The amount of rent you pay for your house in excess of 10 per cent of your basic pay
c. 50 per cent of your basic salary, when you reside in a metro city or 40 per cent if you reside in a non-metro city.
The least value of these three values is allowed as tax exemption on your HRA. You can discuss restructuring your pay structure with your employer in order to avail the most of your HRA tax benefit.
Here is a sample illustration for your understanding:
Sunitha earns a basic salary of Rs 40,000 per month and rents an apartment in Delhi for Rs 20,000 per month (hence eligible for a 50 per cent of the basic pay for HRA exemption). The actual HRA she receives is Rs 25,000.
These values are considered to find out her HRA tax exemption:
a. Actual HRA received, i.e. Rs 25,000,
b. 50 per cent of the basic salary, i.e. Rs 20,000,
c. Excess of rent paid over 10 per cent of salary, i.e. Rs 20,000 minus Rs 4,000 is Rs 16,000
The value considered for her actual HRA exemption will be the least value of the above figures. Hence, the taxable HRA amount for Sunitha per month will be Rs. 25,000 – 16,000 (available HRA deduction) = Rs. 9,000.
5. Can I simultaneously avail tax benefits on my home loan and HRA?
The tax benefits for home loan and HRA are two separate entities and have no direct bearing on each other. As long as you are paying rent for an accommodation, you can claim tax benefits on the HRA component of your salary, while also availing tax benefits on your home loan. This could be the case if your own home is rented out or you work from another city etc. However, you need to account for any rental income you receive from the property you own under income from other sources.
Regards,
NArayana
From India, Hyderabad
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
HRA-Unit 2.ppt
Reclassificatio n of towns for HRA for central govt employees 21.7.2015.pdf
HRA.doc