HOUSE RENT ALLOWANCE
ALLOWANCES means a fixed sum paid to an employee for a specific purpose without confirming the end utilization. Under the income tax Act,1961,allowance is taxable on due or receipt basis, whichever is earlier.
Various types of allowances are as follows:-
¤House Rent Allowance, sec 10(13A) Rule 2A
¤Special Allowance, sec 10(14) Rule 2BB
-> Personal Allowance
-> Allowance for official duty
¤ Foreign Allowance, sec 10(7)
¤ Any other allowance HOUSE RENT ALLOWANCE SEC 10(13A) RULE 2A Payment by the employer to the employee in cash so that the employee may take a house on rent is called House Rent Allowance.
Example: If Mr. Kushal is employee in Big boss ltd. and Mr. Andy his employer has paid him ₹5000 p.m. for taking a house on rent, it will be called House Rent Allowance.
House rent allowance is exempt to the extent of the least of the following:-
i) House rent allowance received
ii) Rent paid over 10% of retirement benefit salary due to the accessee for the relevant period.
iii) 50% of retirement benefits salary in case of Bombay, Calcutta, madras and delhi. 40% of retirement benefits salary in case of any other place for valid relevant period.
Inhe bhi yaad rakho!!
* exemption is not available to an accessee who lives in his own house or in al house for which he has not incurred expenditure of rent.
* Relevant period means the period during which the said accommodation was occupied by the accessee during the previous year.
* Retirement Benefit Salary shall include :
1) Basic Pay
2) Dearness Allowance, if the terms of employment so provided.
3) Commission if it is paid as fixed percent of the turnover as decided in GESTETNER DUPLICATORS PVT. Ltd v CIT, (1979) 117 ITR 1 (SC)
*salary shall be computed on due basis i.e. Any arrear or advance shall not be included.
Example: Mr. Chulbul pandey is employed in dabangg ltd and is posted at agra. He is getting basic pay ₹30000 p.m. dearness allowance ₹20000 p.m. Where 40% of DA forms part of salary. Employer has also paid Mr. Chulbul pandey a bonus of ₹3000 p.m. and commission @ 3% on sale turnover of ₹5000000. House Rent Allowance is ₹20000 p.m. Whereas rent paid by mr. Chulbul pandey is ₹12000 p.m. Compute taxable salary of mr. Chulbul pandey for AY 13-14
Samadhaan: Calculation of taxable HRA :-
HRA will be exempted to the extent of the least of the following:
1) HRA RECIEVED =₹20000*12 =₹240000
2) RENT PAID OVER 10% OF RETIREMENT BENEFIT SALARY DUE TO ACCESSEE
=> Retirement benefit salary Basic pay 30000*12 = 360000
DA 40%(20000*12) = 96000
Commission 3%(5000000) 150000 = 606000
10% of RBS= 10%(606000) =₹60600
so, rent paid over 10% of RBS due to accessee =(12000*12) – (60600) =₹83400
3) 40% of RETIREMENT BENEFIT SALARY =40% (606000) = ₹242400
Therefore, HRA exempted = ₹83400
so, HRA RECIEVED 240000 (-) HRA EXEMPTED 83400 TAXABLE HRA 156600
CALCULATION OF GROSS SALARY:-
Basic pay 360000
Dearness allowance 240000
House rent allowance 156600
GROSS SALARY 942600
5) If there is any change in HRA, rent paid, retirement benefit salary or the place of posting during the year, there will be seperate calculation for each of such change.
Example: Mr. Khiladi is employed in Boss ltd. And is getting basic pay ₹20000 p.m. HRA ₹10000 p.m. He has paid rent ₹1000 p.m. from 1st april 2012 to 30th september 2012 and thereafter rent was paid at ₹3000 p.m. Compute the taxable portion of HRA.
Samadhaan: FROM 1-4-12 TO 30-9-12 Least of the following is exempt
a) ₹10000*6 =60000
b) (₹1000*6) – [10%(20000*6)] =₹6000 – ₹12000 =NIL
c) 40%(20000*6) =₹48000
Least = Nil
so, Rent recieved = ₹60000 (-)Exempt = NIL Taxable HRA = ₹60000
FROM 1-10-12 TO 31-3-13 Least of the following is exempted
a) ₹10000*6 =₹60000
b) (3000*6) – [10%(20000*6)] = ₹6000
c) 40%(20000*6) = ₹48000
Least = ₹6000
So, Rent recieved = ₹60000 (-) HRA exempted = (₹6000) Taxable HRA = ₹54000
Therefore, total taxable HRA for the AY 13-14 = ₹ (60000 54000) = ₹114000