Hi all,
First of all, I am thankful to all members here on this citehr for providing good content. I want to know about HRA policies. Can management have different HRA for all employees, or does it have to be uniform for all employees?
From India, Pune
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First of all, I am thankful to all members here on this citehr for providing good content. I want to know about HRA policies. Can management have different HRA for all employees, or does it have to be uniform for all employees?
From India, Pune
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Employees generally receive a house rent allowance (HRA) from their employers. This is a part of the salary package, in accordance with the terms and conditions of employment. HRA is given to meet the cost of a rented house taken by the employee for his stay.
The Income Tax Act allows for a deduction in respect of the HRA paid to employees. The exemption on HRA is covered under Section 10(13A) of the Income Tax Act and Rule 2A of the Income Tax Rules. It is to be noted that the entire HRA is not deductible. HRA is an allowance and is subject to income tax.
An employee can claim an exemption on his HRA under the Income Tax Act if he stays in a rented house and is in receipt of HRA from his employer. In order to claim the deduction, an employee must actually pay rent for the house which he occupies. The rented premises must not be owned by him. In case one stays in their own house, nothing is deductible and the entire amount of HRA received is subject to tax. As long as the rented house is not owned by the assessee, the exemption of HRA will be available up to the minimum of the following three options:
1. Actual house rent allowance received from your employer
2. Actual house rent paid by you minus 10% of your basic salary
3. 50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non-metro
This minimum of the above is allowed as income tax exemption on house rent allowance. Salary here means basic salary which includes dearness allowance if the terms of employment provide for it, and commission based on a fixed percentage of turnover achieved by the employee. The deduction will be available only for the period during which the rented house is occupied by the employee and not for any period after that.
Meaning of Salary for calculating the exemption of HRA:
- Salary means (Basic + D.A + Commission based on a fixed percentage of turnover).
- Salary is to be taken on a due basis in respect of the period during which the accommodation is occupied by the employee in the previous year.
Examples for the calculation of exemption/deduction of HRA:
X has received the following amounts during the previous year.
1. Basic Salary – Rs. (5000*12) – Rs. 60,000/-
2. Dearness Allowance (D.A) – Rs. (1000*12) – Rs. 12,000/-
3. House Rent Allowance (H.R.A.) – Rs. (2000*12) – Rs. 24,000/-
4. Actual Rent Paid – Rs.(2000*12) – Rs. 24,000/-
Calculation:
The minimum of the following amount shall be exempt
- Actual HRA received (2000*12) – Rs. 24,000/-
- Rent Paid in excess of 10% of salary (24000-7200) – Rs. 16,800
- 40% of Salary – Rs. 28,800/-
Therefore, Rs. 16,800 shall be exempt, and the balance Rs. 7,200 shall be included in the gross salary.
From India, Bangalore
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482The Income Tax Act allows for a deduction in respect of the HRA paid to employees. The exemption on HRA is covered under Section 10(13A) of the Income Tax Act and Rule 2A of the Income Tax Rules. It is to be noted that the entire HRA is not deductible. HRA is an allowance and is subject to income tax.
An employee can claim an exemption on his HRA under the Income Tax Act if he stays in a rented house and is in receipt of HRA from his employer. In order to claim the deduction, an employee must actually pay rent for the house which he occupies. The rented premises must not be owned by him. In case one stays in their own house, nothing is deductible and the entire amount of HRA received is subject to tax. As long as the rented house is not owned by the assessee, the exemption of HRA will be available up to the minimum of the following three options:
1. Actual house rent allowance received from your employer
2. Actual house rent paid by you minus 10% of your basic salary
3. 50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non-metro
This minimum of the above is allowed as income tax exemption on house rent allowance. Salary here means basic salary which includes dearness allowance if the terms of employment provide for it, and commission based on a fixed percentage of turnover achieved by the employee. The deduction will be available only for the period during which the rented house is occupied by the employee and not for any period after that.
Meaning of Salary for calculating the exemption of HRA:
- Salary means (Basic + D.A + Commission based on a fixed percentage of turnover).
- Salary is to be taken on a due basis in respect of the period during which the accommodation is occupied by the employee in the previous year.
Examples for the calculation of exemption/deduction of HRA:
X has received the following amounts during the previous year.
1. Basic Salary – Rs. (5000*12) – Rs. 60,000/-
2. Dearness Allowance (D.A) – Rs. (1000*12) – Rs. 12,000/-
3. House Rent Allowance (H.R.A.) – Rs. (2000*12) – Rs. 24,000/-
4. Actual Rent Paid – Rs.(2000*12) – Rs. 24,000/-
Calculation:
The minimum of the following amount shall be exempt
- Actual HRA received (2000*12) – Rs. 24,000/-
- Rent Paid in excess of 10% of salary (24000-7200) – Rs. 16,800
- 40% of Salary – Rs. 28,800/-
Therefore, Rs. 16,800 shall be exempt, and the balance Rs. 7,200 shall be included in the gross salary.
From India, Bangalore
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Dear Sir,
Thanks for reply can you just tell me can management have different HRA for all employees or it has to be uniform for all employees, since I am getting very less from other employee of organization, how I can negotiate this situation
From India, Pune
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Thanks for reply can you just tell me can management have different HRA for all employees or it has to be uniform for all employees, since I am getting very less from other employee of organization, how I can negotiate this situation
From India, Pune
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Hi, You can have different HRA for different employees. Normally you can keep fixed % on Basic grade wise. So that it will be easy for the calculation. Regards, Hrushikesh
From India, Mumbai
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From India, Mumbai
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Hey there, find below all about HRA as per Income Tax laws.
Mostly, HRA (House Rent Allowance) is part of the salary package. The HRA benefits can be received from the employer, and the person who receives the benefits of HRA is eligible to declare the HRA for tax savings.
The full detail about the HRA exemption is described under Section 10(13A) of the Income Tax Act, 1961. The three conditions to be eligible for HRA exemption are:
1) Actual House Rent Allowance received by the employee
2) Excess of rent paid for the accommodation occupied by him over 10% of the salary.
3) 50% of the salary where the residential house is situated in Mumbai, Calcutta, Delhi, or Chennai, and 40% of the salary where the house is situated at any other place.
Note: "The minimum of the above three amounts shall be exempt from tax, and the balance shall be taxable and included in the gross salary of the employee."
From India, Delhi
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Mostly, HRA (House Rent Allowance) is part of the salary package. The HRA benefits can be received from the employer, and the person who receives the benefits of HRA is eligible to declare the HRA for tax savings.
The full detail about the HRA exemption is described under Section 10(13A) of the Income Tax Act, 1961. The three conditions to be eligible for HRA exemption are:
1) Actual House Rent Allowance received by the employee
2) Excess of rent paid for the accommodation occupied by him over 10% of the salary.
3) 50% of the salary where the residential house is situated in Mumbai, Calcutta, Delhi, or Chennai, and 40% of the salary where the house is situated at any other place.
Note: "The minimum of the above three amounts shall be exempt from tax, and the balance shall be taxable and included in the gross salary of the employee."
From India, Delhi
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