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Are there any stringent rules that you have to follow regarding House Rent Allowance?

In my company, I am eligible for a HRA of Rs 5,300 per month. But, they refuse to give me the entire amount stating that I am staying with one of my colleagues in the same apartment.

Being a bachelor, am I not eligible for claiming 40% of 'Basic' as HRA?

- Srinivas Dasyam

HRA deduction is available to employees having a HRA component structured into their salary structure.

The basic factors that needs to be considered here are as follows:

1. Place of residence: Metro or other

2. Actual amount of HRA received

3. Actual rent paid

4. Salary constitutes of Basic + Dearness Allowance (if terms of employment so provide) + commission based on a fixed percentage of turnover

To calculate the exemption, the following three amounts are compared and least of the three is exempt:

1. If you reside in a metro, then 50% of salary or else 40% of salary will be calculated.

2. Actual HRA. In your case, the actual HRA will be Rs 63,600 (5300*12).

3. Actual rent less 10% of salary. If the rent paid by you does not exceed 10% of your salary, then the total amount of Rs 63,600 (HRA received) will be taxable.

As you are sharing the rental accommodation with your colleague, the share of your rent will be taken as the actual rent paid by you.

To see the other queries answered, read Have you been gifted shares?

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