House Rent Allowance: HRA Meaning and Applicability

The annual salary an employee gets from his employer is divided into various components. The component that is paid for renting an accommodation is known as the House Rent Allowance or HRA. HRA is paid to an employee over and above his basic salary.

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What is HRA?

HRA is the part of your salary which is paid to make rent payments. In other words, a house rent allowance is the compensation paid by the employer for the rent paid by their employees to live in the place of employment.

How much HRA do I get?

In case you work in a metropolitan city, 50% of your basic salary will be paid as the HRA. In any other city, the HRA will be 40% of your basic salary.

Is HRA paid if I don’t live in a rented home?

The HRA part of the salary is paid assuming that the employee does not own a house and must rent a property for accommodation due to his employment. HRA will still be paid if you live in your own home. However, since there is no actual rent payment, the entire HRA component will come taxable.

Is HRA taxable?

Yes, depending on whether or not you live in a rented accommodation and the rent amount paid, HRA may be partially or fully taxable.

Read also: How to get HRA exemption on rent paid to family members?

HRA tax exemption

HRA tax exemption is available under Section 10(13A) of the income tax act.

Conditions to Section 10 (13A) benefit

Only salaried individuals can claim deductions.
HRA should be part of your salary package.
You should actually be living in a rented accommodation in the city where you work.
The deduction is available only for the period during which the accommodation is occupied by the taxpayer.
The tenant must provide rent payment receipts.

Can you claim HRA tax exemption for rent paid to spouse?

The Income Tax Appellate Tribunal, Delhi, recently ruled that HRA exemption under the Income-Tax Act cannot be denied on the ground that the assessee paid rent to his spouse.

Can you claim HRA tax exemption for rent paid to parents?

Yes, the Income-Tax department allows HRA exemption if rent is paid to parents, albeit with some conditions.

FAQs

What is HRA full form?

HRA stands for House Rent Allowance.

What is HRA in salary?

Salary is made up of various components, including basic salary, HRA, LTA, etc. The component that companies pay to their employees to rent an accommodation is known as house rent allowance.