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I want to know about HRA claim in filing form 12B in my company. Example: I am paying rent of ₹6,500 x 12 = ₹78,000 yearly and my salary basic is ₹13,740. So as per HRA calculation rule, in Form 12B only ₹45,600 was considered instead of ₹78,000, which was actually paid to landlord. Had total rent been considered, I don't need to pay tax. Can you tell me who has created this rule and where to complain for changing such a rule?
Bharat Patil
As per the provisions of Section 10(13A) of the Income-tax Act, 1961 (‘the Act’), any special allowance, specifically granted to an employee by his employer, to meet expenditure actually incurred on payment of rent, in respect of residential accommodation occupied by the employee, is exempt as per the prescribed calculation and other relevant considerations.
House Rent Allowance exemption is calculated as lower of the following:
• Actual HRA received from employer;
• 50 per cent (in case of metro cities*)/40 per cent (in case of non-metro cities) of the basic salary;
• Actual rent paid minus 10 per cent of (Basic salary + Dearness allowance)
*Metro cities being, Delhi, Mumbai, Chennai and Kolkata.
In the absence of complete details, we are unable to compute the HRA exemption amount. In case your employer has calculated HRA exemption incorrectly, you may claim the correct exemption amount while filing your return of income for the respective year. If feasible, you may also request your employer to compute the correct exemption as per the applicable provisions. However, it is pertinent to note that the exemption cannot exceed the lower of the amount as calculated per the above prescribed provisions.
These provisions are framed by the Ministry of Finance, Government of India, and you may make a representation on any issue for their consideration.
The writer is a practising chartered accountant
Send your queries to taxtalk@thehindu.co.in
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