Curious About HRA Tax Exemption Limits? Can You Claim More Than One Lakh?

Hi,

I just wanted to know, is there any maximum limit for tax exemption in HRA. Can we get tax exemption for above one lakh HRA? I heard that one lakh is the maximum amount we can get tax exemption through HRA. Please clarify.

As per Sec 24, actual rent paid or HRA received, whichever is lower, is tax-exempted. There is no limit.

Dear Salman,

House rent in excess of 1/10th of salary is subject to a ceiling equivalent to HRA.

Abbas P.S
ITI Ltd.,
PALAKKAD

Exemption on HRA: Conditions and Calculations

Exemption on HRA is subject to certain conditions stipulated in the Income Tax Act under Section 10(13A) of the Act. Exemption on HRA can be claimed by an employee who stays in a rented house. The rented premises must not be owned by him/her or by his/her spouse. In case an employee is staying in their own house, the entire amount of HRA received is subject to tax.

Calculating HRA Exemption

Exemption of HRA will be available on the least of the following three options:

1. Actual HRA received from the employer
2. Actual house rent paid minus 10% of the employee’s basic salary
3. 50% of basic salary, if living in a metro, or 40% of basic salary, if living in a non-metro

The minimum of the above is allowed as income tax exemption on House Rent Allowance.

Exemption on House Rent Allowance (HRA)

Exemption on HRA is subject to certain conditions stipulated in the Income Tax Act under Section 10(13A) of the Act. Exemption on HRA can be claimed by an employee who stays in a rented house. The rented premises must not be owned by him/her or by his/her spouse. In case an employee is staying in their own house, the entire amount of HRA received is subject to tax.

Conditions for HRA Exemption

Exemption of HRA will be available on the least of the following three options:

1. Actual HRA received from the employer
2. Actual house rent paid minus 10% of the employee’s basic salary
3. 50% of basic salary, if living in a metro, or 40% of basic salary, if living in a non-metro

The minimum of the above is allowed as income tax exemption on House Rent Allowance.

Regards, Salman

Hi All,

Thanks for the above information shared by different folks. I am aware of the criteria for tax exemption. But my only doubt is the maximum limit of HRA. Someone shared this info, "If HRA is more than 1 lakh, we get an exemption for 1 lakh only, and the remaining amount is taxable." I think there is no higher limit for tax exemption for HRA. Please reconfirm the same.

Regards,
Salman

Hi! As per my knowledge, there is no such limit on HRA as mentioned by you. Normally, HRA is fixed by companies as a percentage of the basic pay of the employee, and such percentage varies between 30% and 50% depending upon the position held, place of employment, etc.

The Income Tax Act does not provide any limitation as regards to payment of HRA is concerned, and the Act prescribes only the limitation for tax exemption on HRA.