How is House Rent Allowance (HRA) exemption calculated?
Employees who
live in rented house can claim HRA exemption to reduce their Income Tax under
Section 10(13A). HRA is either fully or
partially exempt. HRA exemption is
minimum of below:
- The
actual HRA received
- Rent
paid reduced by 10% of salary
- 50%
of salary (if you live in a metro city), or 40% of salary (if you live in a
non-metro city)
Note: Salary for the purpose of HRA exemption is basic salary and Dearness Allowance (DA)
If the result
is a negative value, it will be considered as nil value and therefore the
negative HRA is totally taxable.