Hi Sneha,Being an employee living in a rented house in a different city, I understand the importance of House Rent Allowance. HRA or House Rent Allowance can be assessed by an agreement between the employer and the employee. Before I begin to tell you the HRA Exemption limit for AY 2021-22, I would first like to brief you on the meaning of House Rent Allowance.HRA, as can be understood by its name, is a house rent allowance given to the employees living in a rented property. It is not given when the employee resides on a property he/she owns. HRA is a part of the salary and is offered to an employee by adding it to the salary in order to help the employee save some taxes. As per the Rule 2A of the Income Tax Rules of Section 10 (13A) of the Income Tax Act, HRA deduction is offered to the employees of an organization.HRA Exemption Limit for AY 2021-22:The HRA exemption limit for the assessment year 2021-22 is Rs. 250000. The landlord must show the earnings from house rent as income in the ITR filed by him in order to avoid any kind of litigation against him.Following are the HRA exemptions of tax provided by the Income Tax Act:
The HRA deduction is said to be the lowest for the HRA given by the employer
If the employee lives in the metro cities like Delhi, Mumbai. Kolkata, and Chennai, are eligible for 50% of their salary as tax exemption.
If the employees live in other cities, they are eligible for 40% of their salary as an HRA tax exemption.
The HRA maximum limit is determined based on certain factors including salary, HRA received, and rent paid. What is the Maximum HRA Exemption Limit?The least of the following amounts is eligible for exemption:
Actual HRA Received:
The amount of HRA received from your employer.50% of Salary (for employees residing in metro cities) or 40% of Salary (for employees residing in non-metro cities): Salary for this purpose includes basic salary, dearness allowance (if it forms part of retirement benefits), and any commission received on the basis of sales turnover.The term 'salary' here excludes any other allowances or perquisites.
Rent Paid minus 10% of Salary:
Rent paid for the accommodation, minus 10% of salary.The HRA exemption cannot exceed the actual HRA received from the employer.So, If you want to know, what is the max HRA limit, I’d like to say that this varies depending on these factors. It's important to note that taxpayers need to maintain proper documentation such as rent receipts and rent agreement to claim HRA exemption.Get Rental Agreement with E-Stamp & Notary Via NoBroker Rental Agreement ServicesRead moreHow to claim HRA if not mentioned in Form 16?
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What is the Maximum Limit for HRA?
Sneha
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April 18, 2022
2022-04-18T09:33:17+00:00 2024-04-06T21:59:19+00:00Comment
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