Income and tax are like two sides of the same coin. You have to pay tax on the money you earn.
You become rich by saving on your taxes. More you save on tax more is the money you spend on yourself and your family.
Components of your salary |
INR |
Basic Salary |
400000 |
Dearness allowance |
20000 |
House Rent allowance |
200000 |
Medical reimbursement |
15000 |
Transport allowance |
9600 |
Hostel allowance |
7200 |
Children's education allowance |
2400 |
Food coupons |
15000 |
Bonus |
178000 |
Provident Fund |
50400 |
Professional tax |
2400 |
Total | 900000 |
Your Company gives you house rent allowance (HRA) as part of your salary. You get an amount of INR 200000 shown in the salary slip.
Rule to calculate HRA exemption
You have to pay tax on the actual HRA received from the employer minus the amount which is the least among the above three conditions.
You stay in Bangalore with your wife in a rented apartment. You pay a monthly rent of INR 20000.This is INR 240000 a year.
You can calculate the tax exemption on the HRA you receive as follows :
You have to pay tax on the actual HRA received from the employer minus the amount which is the least among the above three conditions.
INR 2, 00,000 - INR 1, 68,000 = INR 32,000. You have to pay tax only on INR 32000 even though your HRA is INR 200000.You get a tax exemption on the remaining amount.
Your friend works in Mumbai and has bought a house there. He resides in a rented apartment in Mumbai itself as his newly bought house is far away from his place of work. He gets HRA as part of his salary. Will he get a tax exemption on the HRA component of his salary?
Your cousin has bought a house in Bangalore which is under construction. He has availed a home loan to construct this house. He stays in a rented apartment. He gets HRA as a part of his salary. Will he get a tax exemption on the HRA component of his salary?
Your brother has availed a home loan and purchased an apartment in your hometown of Bangalore. Can he avail a tax exemption on the HRA component of his salary?
This article should make you a master in calculating tax exemption on the HRA component of your salary.
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