IT Exemption for HRA – Should we take DA ?

The exemption from tax with regard to HRA is restricted to the least of the following amounts:-

(i) Actual amount of H.R.A.

(ii) The amount by which actual rent paid by the employee exceeds 10% of his salary; and

(iii) 50% of salary if the rented house is situated at Delhi, Bombay, Kolkata or Chennai, or 40% of the salary in the case of other cities.

As per the explanations given in the Income tax site (Check this IT publication)

“Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

For throwing further light on this and especially for getting clarification on the term “if the terms of employment so provide” mentioned above, GConnect Team contacted our well known friend and GConnect member Shri.J.Lakshmi Narayanan, Deputy Office Superintendent, Central Excise Department, Salem, who always comes to our rescue with his in depth knowledge on administrative matters.

He clarified this aspect as follows.

“As per explanation given under Rule 3 of IT Rules which clearly stipulates that ” salary includes the pay, allowances, bonus payable monthly or otherwise but does not include the following viz., :- (i) Dearness Allowance or Dearness pay unless it enters into the computation of superannuation or retirement benefits of the assessee concerned ”

As per our extant Pension Rules 1972 pay plus DP will only form part for the retirement benefits. Whereas in the New Pension Scheme it is otherwise (i.e) 10% of pay + DA + DP is the subscription by the employee and contribution by the employer.

Thus in so far as CG employee other than NPS employees are concerned, salary will be pay and dearness pay only for the purpose of exemption in respect of HRA under Income Tax Rules.”

Other aspects of HRA :

In the case of employee residing in his own house, is the HRA exempt from Tax ?

No. As he is not paying any rent, so exemption from tax with regard to H.R.A. is restricted to ‘Nil’.

Should Rent receipt compulsorily be given to DDO ?

No. salaried employees drawing house rent allowance upto Rs.3,000 pm will be exempted from giving rent receipt to DDO. But in the regular assessment of the employee, the Assessing Officer is free to make enquiry or request proof of payment of rent by assessee.

Here is an online tool to calculate Income Tax exemption on HRA

31 Comments

  1. Sir, Even in the %PC there is recommendation for exempting DA for IT purpose. As DA given for increase in WPI resulting increase in expenditure for commodity it is not fair to tax on DA

  2. Sir iam a central govt. employee and paying rent @ 4500 per month. pleae clarify whether PAN and IT returns of the house owner is necessary for claiming exemption of HRA. Please do the need full. thanks.

    1. What are the documents required to be produced by assessee for getting house rent rebate on rent paid by him? If formality of Lease Aggreement is must for rent rebate?

      1. Dear DDO (Des)
        Assesee to produce Rent receipt issued by the house owner to claim HRA exemption under Sec 10(13) if IT Act. However, As per IT dept.’s clarification letter upto Rs.3000 as rent, DDOs are instructed not to insist production of Rent Receipt. In any case allowance of Rent exemption under the hands of DDO/at source is not final but prone to be verified by the IT dept at any point of time while assessment of that year’s ITR

  3. While calculating salary, whether Basic, Grade pay, Non-practice allowance (NPA), and DA also be taken? Can someone please clarify?

  4. sir, in on line tool for ITR I there is a calculation mistake when calculating HRA As per my knowledge HRA deducation calculate by excess PAYMENT OF HOUSE RENT of 10% of (basic pay + Gr pay+ D.A) by employee , in your tool D.A not addfor calculation please check it and confirm it thank

    here is new reply comment:
    Dear Sanjeev DA will not be taken into account for HRA exemption in IT, when the DA is not taken into account for PENSION calculation. As far as Govt employees the IT calculation programme is correct as per IT Rules ………………………………………………sir, may I get above order for my DDO who add D.A for calculation HRA exemption

  5. Whether a govt servant can make payment of HRA to his wife who is the sole owner of the house, in case he meets all other requirements of HRA , in this regard ?

    1. Do you mean the situation of Govt Servant paying rent to his wife for the House owned by the his wife? Can you please explain the background for understanding the issue

  6. Sir i am staying in a rented house, i pay rent less than my HRA,my house owner doesn’t give rent receipt, but office wants receipt, nowadays office started claiming PAN number of the house owner in the rent receipt. I can’t submit the receipt to the office. in such situation how hra exemption will be calculated?

    1. DEAR RAJA
      nO OTHER GO TO AVAIL hra EXEMPTION UNDER sEC 10(13 A) & rULE 2 A EMPLOYEES DRAWING hra MORE THAN 3500 PER MONTH SHALL BE REQUIRED TO PRODUCE RENT RECEIPT INVARIABLY TO THE TAX DEDUCTING OFFICER AT SOURCE

  7. dear , please, tell me if a person has his income Rs. 155/- p.m.(basic pay) on his pay scale RS.55-3-85-X,B-4-125-5-130, on 20.08.1966. what would be his next month bay pay and total income,gross,net, on 15.10.1966. this person was working under the ministry of commerce and industries, development wing ,estt. and section ii ,
    udyog bhawan, new delhi-110 001.

    2. he also worked in iift from 15.10.1966   –  17.05.1971. his last  monthly salary was fIxed RS. 230/- onwards on the pay grade Rs.210-10-270-15-300-eb-15-450-eb-20-530as on 15.10.1968. question are same as above.

    3. he also worked  in ITPO from 18.05.1971  –  31.05.1964  on the pay scale 
    Rs.3700 – 4500/- (Rs. 3700-125-4700-eb-150-5000).

    now i would like to know that  what would be his salary is the new pay scale with NET and  GROSS SALARY as per 6th pay commission started from o1.04.1996.
    of his service in his life.  AND the detais of pension with total amount from GOVT.

    it would be very kind of you, if immediately send the reply to me. he  want to get his pension from the govt. of India, becouse till date he has not get a rupees from GOVT.

    was    

  8. Dearness Allowance or Dearness pay unless it enters into the computation of superannuation or retirement benefits of the assessee concerned ”

    the clarification is wrong i think. CG employees whether NPS or not have role of DA in pensionary benefits. Isnt DCRG a pensionary benefit, Leave encashment as well, both these pensionary benefits include DA as a part of its value. So, I think Salary for the purpose of HRA exemption should include DA.

  9. I calculated through your gocnnect i am getting Rs.71616 as HRA rebate. where as through railway calaculation i am getting 41800 only. i shall give u the details of pay. pl. help.
    pay – 224640 gp – 55200 da-290746 da arrears – 7338 (HRA RECEIVED RS, 83952)

    KINDLY calculate and let me know why the difference.

  10. Also pl. let me know, what is the exemption rent receipt up to which pan card of the house owner need not be taken. Here in Railways, they say it is rs. 1,00,000/- if there is any circular on the amount kind post the link

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