The financial year 2016-2017 is coming to an end. Many
of the salaried individuals are now confused how to save tax on House Rent allowance. If you have paid your house rent you can avail house rent rebate on income tax as per government rules. Here we will tell you how to get full rebate on HRA. tax
Full Form Of HRA
Full form of HRA is House Rent Allowance received by an employee from his employer. Generally HRA depends on the basic salary of the employee. HRA is calculated on his basic salary. City wise percentages are categorized for calculating house rent allowance. This article will definitely help you in understanding how how to get full rebate on HRA in income tax if you have paid a suitable amount as house rent.What is HRA :-
Here a question also arises what an HRA is. First
of all it is important to understand HRA. HRA is called House Rent Allowance. HRA is
paid to an employee who lives in a rented house. Generally HRA is Calculated on
the salary of any individual.
The income tax act of India allows its citizens to
take full rebate on HRA received. But in some cases many people will fail to
get full rebate on their HRA received. This happens because of the ignorance of
the rule pertaining to the rebate on HOUSE RENT ALLOWANCE. Any individual can
take the benefit of the HRA rebate. For this purpose he should be living in
rented accommodation. If he is living in rented house he can claim the
exemption on the HRA received from his company/department. This HRA can fully
or partially be exempted depending on the documents you provide to your
employer. But on the other hand if you live in your own house and receive HRA
then your HRA will be fully taxable as per law.
How much HRA can be exempted from tax:-
The
exemption of HRA is fully depend on the following three terms. To understand
HRA rebate you should keep the following points in mind that are as follows
1.
Actual HRA received
2.
50% of your basic salary(metro cities)
3.
40% of your basic salary(non metro cities)
4.
Actual rent paid minus10 % of his salary (here
salary means basic salary that do not include any allowance other than dearness
allowance.)
The above mentioned terms can easily be understood by
the help of this example-
Let Ashok lives in MUMBAI. He gets his basic salary
@ 50,000 per month. He pays rupees 15,000/- as house rent and receives rupees
5000 as HRA.
Then his annual salary will be 12x50000= 600000
Rupees
10 % of his salary 60000 rupees
Actual rent paid yearly is 15000x12=180000
50 percent of his salary is 300000 Rupees.
Now the exemption will be as under
1.
50 % of the salary 300000
Rupees
2.
Actual amount of HRA received is 60000 Rupees
3.
Actual rent paid in excess of 10 % of salary 180000-60000=120000
Then the person will be eligible to get exemption
equal to minimum of the above three terms that is 60000/- yearly.
If you do not know what amount you should have to
pay for getting full exemption on receive HRA, then the under described
formula
can help you:-
Let actual rent paid = A
10 percent of salary
Exemption to be allowed
Formula:-
