HRA exemption is the most profitable resource. It is considerably offered and eligible to employees those who are paying rent to reduce the tax burden. The HRA tax benefit is majorly calculated by using the HRA calculator. It is calculated manually with the help of a calculator. The HRA exemption is minimum and displays the exact amount received. The basic salary of an individual employee in metro and the non-metro city is nearly around 50% of the actual rent which is paid less than 10% of basic salary. The allowance and commission are included in the basic salary package as computation charges of HRA exemption. Moreover, the submissions of a rent receipt or an agreement to the employer help in claiming the tax benefit.
What is HRA?
The particular amount of HRA exemption is reduced from the total income prior to a taxable income. It benefits an individual to reduce taxation. HRA is received from the employer and is fully taxable if an employee is living in his own house and not paying any rent. An individual can calculate HRA using the HRA exemptions calculator. Moreover, an individual can calculate HRA manually according to the rules associated with it.
The basic salary of the employee includes a dearness allowance and commission. The tax benefit on HRA reduces the taxation burden on people. They are not taxed for getting roofs on their heads in the place they work. An individual can also avail of the tax benefit on HRA even though they are availing of home loans on a different home. It takes into account the higher rent paid due to place of residence.
House Rent Allowance – HRA tax exemption
HRA is one such component of the Income under the head Salary. It is offered by the employer to the employee for rented accommodation. It is for primary understanding that helps employees with tax benefits towards the payment for accommodations every annual year.
Leave Travel Assistance – LTA tax exemption
The Union Budget 2020 introduces the new tax regime. It conveys that it is provided to the individuals with a choice to select the old tax regime with exemptions or the new tax regime without certain exemptions. The tax benefit of the house rent allowance is availed by the individuals opting for the old tax regime.
✅ Does an individual need to pay maintenance charges included in the calculation of HRA tax exemption?
No. Maintenance charges are not included in the calculation of HRA tax exemption. HRA exemptions can be claimed for rent paid alone.
✅ How much of my HRA is exempt from tax?
Following are the deductions explained from one’s taxable income-
- Over 50% of the basic salary if an individual is residing in a metro city
- Over 40% of the basic salary if an individual is residing in a non-metro city
- Actual rent paid is comparatively less than 10 percent of the basic salary
- The actual amount of HRA is paid by the employer alone.
✅ Is allowance included when calculating HRA?
Yes, allowance is considered as part of basic salary.
✅ Does an individual claim HRA tax exemption and rebate on a home loan?
Yes, an individual can claim HRA tax exemptions and rebates on the home loan.
To gather more information about the features of Section 139 Income Tax act, visit the Dialabank website.
Table of Contents
- 1 What is HRA?
- 2 Leave Travel Assistance – LTA tax exemption
- 3 FAQs