How to Calculate the Income Tax Exemption on House Rent Allowance (HRA)?
HRA - House Rent Allowance
It forms a one of prominent portion of your salary earnings. Many people think that they will get excemption from tax whatever they pay as rent. But is not true and there is a lot of complex calculation done before actually deducting from taxable income.
If you look at your pay slip, you will see an amount specified under HRA column. This is the amount given by your employee as Housing Rent Allowance. This entire amount is not tax free. In fact if you dont submit your rent reciept this amount will become taxable.
There is a calculation to be done before actually getting the exact figure.
The Rule is the value which is minimum of following three will be exempted from income tax
1. Hra received
2. 50% of salary (Basic Salary + DA) in case of residential accommodation taken on rent is situated in Mumbai,Kolkata,Delhi, Chennai and 40 % of salary in in any other case.
3 Rent paid in excess of 10 % of salary (Basic Salary + DA)
For Example
If your basic salary + DA= 10000
HRA = 4000
Rent Paid = 2000
calc 1 = 4000
calc 2 = (Metro) 5000 or (non-metro) 4000
calc3 = 2000- 1000 = 1000
The min of these three calculation is Rs.1000 .. So 1000 Rs it the amount excempted from tax ( ofcourse if you submit your bills :) )
There are also lot of free tax calculator available to do this .. but always better to what goes inside.
See ya
- Vinay
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