ITR Exemption: There is a type of allowance, which is given by an employer to his employee in lieu of payment of house rent expenses.
HRA Exemption Rules: Finance Minister Nirmala Sitharaman had increased the standard deduction along with exemption in the Union Budget for salaried taxpayers filing Income Tax Return (ITR) for the financial year 2023-2024. At the same time, under the new tax regime, the tax exemption limit has also been increased.
Even after increasing the tax limit, if your income is coming in the tax category, then you can save tax by making multiple claims under the old tax system. You can also save tax by claiming house rent allowance under the old tax regime.
What is HRA?
House Rent Allowance is a type of allowance, which is given by an employer to its employee in lieu of payment of house rent expenses. HRA is included as a component of the salary of the employee. According to Rule 2A of the Income Tax Act, the benefit of HRA exemption is given to salaried people under section 10(13A). This exemption is not given under the new tax regime.
Know how to get benefit?
Let us tell that a person gets the benefit of HRA only if he chooses the old tax regime. If you choose the new tax regime, then you will not get the benefit of HRA. In such a situation, if you want to take advantage of the tax exemption available under HRA, then you will have to choose the old tax regime. Keep in mind, if the person receiving house rent allowance is living in his own house, then he does not get the benefit of HRA exemption and this entire amount comes under the tax net.
How to calculate tax exemption on HRA?
- 50 percent of basic pay plus DA for those living in metro cities
- 50% of basic pay plus DA for those living in non-metro cities
- Actual rent paid less than 10% of basic pay plus DA
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