Tax Saving - Help

I am a fresher going to Join a construction company in Mumbai. The offer is quite good.
I am getting 5.0 Lakhs per annum CTC
I would be getting Rs. 34,000/- per month in hand (inclusive of HRA)
I am thinking of residing at my Aunt's place in Mumbai. She is an NRI.She has told me that I can stay there for free, as she is not going to return back to India for the next 2 years.
I want to know:
1. Whether this HR Allowance, which will be given to me is taxable?
2. If yes, how can I reduce my tax burden (in the context of HRA)?
The matter is urgent.
Thank you

Though your Aunt doesn't want rent from you, you show as if you are paying rent to your aunt for your stay in her house. To my knowledge if you show it as if you are paying rent then your HRA will be taken as per the calculation, i.e., (for example)
HRA
Actual HRA 18,735
Rent paid 18,700
10% of Basic 4,258 14,442
50% of Basic 21,290

Exemption 14,442 (wel)
Hope you understand.

Hope you know the HRA Calculation:
1. Actual HRA means the break up of the HRA amount * 12 (annual HRA)
2. Rent Paid means the rent paid by you for the whole year.
Less : 10% of the basic salary
3. 50% of basic salary
In the above calculation which ever is less is taken for exemption. The exemption amount will be deducted from the Actual annual HRA.
I explained that only in my previous post.
Assume that you are paying rent to your aunt. Hope you have a HRA in your salary break up. Do the calculation as per the above and save some money from tax.

Vasanthi

So you mean to say:
(a)HRA (given by company) - Rs. 18735
(b)Rent Paid - Rs. 18700
(c)Rent Paid - (10%*Basic Salary) - Rs. 18700 - 4258 (.10*42580)
= Rs. 14,442
(d)50% of Basic = Rs. 21,290
Therefore lesser of (b), (c), (d) is considered for tax exemption.
Therefore, Rs. 14,442 is considered for tax exemption.
Am I correct?
What is the relevance of the HRA by the company (in the sense that if the company gives an HRA of Rs. 20000)? In other words, what happens to the (20,000 - 18735)? Where is this considered in the tax calculation?

My salary break-up is as follows (monthly):
Basic - 11,900
HRA - 5,945
Other Allowances - 18,448
Could you please illustrate and make me understand with an example, with the following details of rent?
Rent: Rrs. 4000/- per month
Since I am new to this aspect of employment, I kindly request you to explain to me the calculation.
Thank you

Madhu,
In your case
Annual basic salary is (11900 * 12) - 142800
Actual HRA (5945 * 12) - 71340
Actual rent paid (4000 * 12) - 48000
1. Actual HRA 71340
2. Actual rent paid 48000
3. Rent paid 48000
Less: 10% of Basic 14280 33720
4. 50% of basic 71400
The least of Rs.33,720/- will be exempted and this will be deducted from Actual HRA, i.e.
HRA for tax calculation is
Actual HRA 71340
Less: Exempted 33720
Taxable HRA 37620
Hope you understand now.
Vasanthi