House Rent Allowance is any special allowance granted
specifically to an assessee by his employer to meet expenditure actually incurred on payment of rent by whatever
name called, in respect of residential accommodation occupied by the assessee.
So, house rent allowance presupposes the
Granted by employer to employee
Employee pays rent for residential
The residential accommodation should be occupied by
The exemption given to house rent allowance is contained in
Section 10(13A) of the Income Tax Act. It provides exemption to the extent as may be prescribed and having
regard to the area or place at which such accommodation is situated and other relevant
As per the section, exemption is denied in the following
If the house occupied by the assessee is owned by
The assessee has not incurred expenditure on payment
of rent in respect of the accommodation occupied by him.
As per Rule 2A of the Income Tax Rules, House Rent Allowance
is exempt to the least of the following:
40% of Salary (50% of salary in case residence is
located in the cities of Mumbai, Kolkata, Delhi or Chennai)
House Rent Allowance received by the employee for
the period during which residential accommodation is occupied by him.
Actual rent paid minus 10% of
Note: Salary for the purpose of HRA exemption
includes basic salary, Dearness Pay, Dearness Allowance entered into service benefits and
commission as a fixed percentage of turnover achieved by the employee. It excludes all other
allowances and perquisites.
No Exemption if employee resides in own house:
House Rent Allowance paid to an employee who is
living in his own house does not qualify for exemption. As per Section 10(13A), only the expenditure actually
incurred on payment of rent in respect of residential accommodation occupied by the assessee (subject to
conditions) qualifies for exemption.
The disbursing authorities should satisfy themselves in this
regard by insisting on production of evidence of actual payment of rent before excluding House Rent Allowance or
any portion thereof from the total income of the employee.
Employee to produce certain documents/receipts before
DDOs: Section 192(13) read with Rule
26C makes it mandatory for DDO to obtain the following details/documents from the employees claiming HRA
Rent paid to the landlord
Name of the landlord
Address of the landlord
PAN or Aadhar Number, as the case may be, of the
Employee has to submit the above details in Form 12BB if the
aggregate rent paid during the financial year exceeds Rs.1,00,000.