This PPT is a part of Income Tax Series which will explain the difference between Exemption, deduction and Rebate. Subscribe to our channel for more such updates.

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Exemption Vs Deduction Vs Rebate
Income Tax Part 2

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3. Overview
Today we will cover Basics of
Exemptions & Deduction
What will we cover?
● Definition
○ Exemptions
○ Deductions
○ Rebate
● Key Difference
● Example
● Sample Calculations
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4. HRA Definition
House + Rent + Allowance

5. HRA Definition
House + Rent + Allowance

6. HRA Definition
House + Rent + Allowance

7. HRA Definition
House + Rent + Allowance

8. HRA Definition
House + Rent + Allowance

9. ● Salaried individuals, who
live in rented houses, can
claim the House Rent
Allowance (HRA) to lower
their taxes – partially or
wholly
● The decision of how much
HRA needs to be paid is
made by the employer
● House is a type of
allowance
● The purpose of this
allowance is to meet the
cost of living in a rented
accommodation
HRA Definition
House + Rent + Allowance

10. Code on Wages 19
● HRA is in list of excluded
allowances
● Is not part of wages
● Ceiling on allowances is 50%
of wages, anything above
will become part of wages.
Income Tax Act
● Exemption limit of 50% of
[basic salary + DA] for
those living in metro cities
(40% for non-metros)
● Only defines exemption
limit
How much HRA?
Different Laws, Different Definition

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12. Employee State Insurance Act
● HRA is part of ESI wages
● ESI is deducted till ceiling
limit
How much HRA?
Different Laws, Different Definition
Provident Fund Act
● HRA explicitly is not form
part of “Basic Wage”
● Does not define the % of
salary permissible
● EPF amendment bill
incorporates, definition of
wage same as code on
wages

13. Following are conditions to claim HRA
● Salaried individual (self-employed individuals cannot claim HRA)
● Stay in a rented accommodation, Not living in self owned house
● Rent exceeds 10 percent of your salary
● HRA is part of salary
● Not paying rent to spouse
Conditions for HRA Exemption
House + Rent + Allowance

14. How Much Deduction?
2
50% of [basic salary +
DA] for those living in
metro cities (40% for
non-metros)
3
Actual rent paid less
10% of basic salary +
DA
The deduction available is the least of the following amounts
1
Actual HRA Received

15. Example
Particulars Case 1 Case 2 Case 3
Basic + DA ( Per Annum ) ₹300,000.00 ₹300,000.00 ₹270,000.00
HRA ( Per Annum ) ₹100,000.00 ₹100,000.00 ₹130,000.00
Rent Paid ( Per Annum ) ₹120,000.00 ₹200,000.00 ₹200,000.00
1. Actual HRA received; ₹100,000.00 ₹100,000.00 ₹130,000.00
2. 50% of [basic + DA] for metro cities 40%
for non-metros)* ₹150,000.00 ₹150,000.00 ₹135,000.00
3.. Actual rent paid less - (10% of basic
salary + DA) ₹90,000.00 ₹170,000.00 ₹173,000.00
Exempt HRA ( loweds of 1,2,3 ) ₹90,000.00 ₹100,000.00 ₹130,000.00
*Let's take Delhi as work place, metro - Calculator at end of the slides

16. ● If the annual rent of your accommodation exceeds Rs.1,00,000,
then presenting the landlord's PAN card is mandatory to claim
TDS Benefit.
● In case the landlord does not have a PAN card, he/she can
provide a self-declaration. (circular No. 8/2013 - 10 Oct’13)
● Individuals or HUFs paying monthly rent to a resident in excess
of Rs. 50,000 are liable to deduct TDS @5% ( u/s 194-IB )
● If the Landlord is a non-resident, 30% TDS to be deducted
More info on TDS - www.tin-nsdl.com
Paying Rent?
Things to remember

17. Who can claim benefit under section 80GG?
● Self-employed or salaried
● Not received HRA during FY
● Spouse or minor child or HUF – do not own any residential
accommodation at the place of residence,
The deduction u/s 80GG is least of the following :
● Total rent paid minus 10% of adjusted total income
● Rs 60,000 per year or Rs 5,000 per month
● 25% of the adjusted gross total income
Are you a Pakodewala?
No HRA? No worry - Section 80GG hai na!

18. Mandeep works at LLA. We provides him HRA, He is a sanskari balak
& lives with parents in their house, not in rented accommodation.
Can he claim HRA benefit?
● Mandeep need to form a rent agreement with parents
● He can pay rent to parents and claim benefit
● He need to transfer money in their account
● Parents have to show that income as rental income in tax filing
If parents are retired / not earning can save a lot in taxes
Joint Family?
No worry - Parents hai na!

19. HRA exemption and Home Loan
Exemption, can both be claimed?
● YES
Two rented houses in two
locations?
● Only one house
Sawal-Jawab !
Jo jyada sochte hai,
Rent Receipt Needed?
● YES, Above 5000/ month
Exemption includes electricity /
maintenance charges?
● NO
Can I cheat the system?
● NO, form 16(B)

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21. Official HRA Calculator
https://www.incometaxindia.gov.in/Pages/tools/house-rent-allowance-calculator.aspx

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