Gireesh Bhalla : Limits, conditions for relief to employees getting HRA under IT?Act, 1961

Section 10(13A) : Any special allowance specifically granted 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 to such extent as may be prescribed having regard to the area or place in which such accommodation is

situate and other relevant considerations.

Nothing is contained in this clause shall apply in case where :-

A) the residential accommodation occupied by the assessee is owned by him or

B)     the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him.

 Limits for the purpose of section 10(13A) :-

  The amount which is not to be included in the total income of an assessee in respect of special allowance referred to in clause (13A) of section 10 shall be :-

 i)    The actual amount of such allowance received by the assessee in respect of the relevant period. Or

ii)   The amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds 1/10th of the amount of salary due to the assessee in respect of the relevant period.  Or

  iii)   an amount equal to :-

a)      where such accommodation is situated in Bombay , Kolkata, Delhi or Madras , ½ of the amount of salary due to the assessee in respect of the relevant period and

b)     where such accommodation is situate at any other place, 2/5th of the amount of salary due to the assessee in respect of the relevant period.

WHICHEVER IS THE LEAST OF (a), (B), and (c)

c)      With reference to the abovesaid, “Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

   In short, an employee is entitled to claim the exemption u/s 10(13A) when all the following conditions are fulfilled :-

a) The allowance from the employer must be specific to meet expenditure on payment of rent.

b)  The residential accommodation occupied by the employee is not owned by him and

c)  The actual payment of rent by the employee should exceed 10% of his salary.