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Example of Leave Travel Allowance (LTA) Exemption Calculation

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<b><span style="font-size: large;">Example of Leave Travel Allowance (LTA) Exemption Calculation</span></b></div>
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Example of <a href="http://www.taxfinanceinfo.com/2013/10/leave-travel-allowance-lta-exemption.html">Leave Travel Allowance (LTA)</a> Exemption Calculation<br />
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<span class="apple-converted-space"><b><span style="font-size: large;">Example: Details of Mr. X for the
Financial Year 2012-13</span><span style="font-size: 11pt;"><o:p></o:p></span></b></span></div>
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<span class="apple-converted-space"><b><span style="font-size: 11pt;"><br /></span></b></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Annual
Salary                                                              Rs.
6,00,000<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Annual
<a href="http://www.taxfinanceinfo.com/2013/10/leave-travel-allowance-lta-exemption.html">LTA</a>                                                                   Rs.   10,000<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">The assessee
travelled from Ahmedabad to Jaipur via Mumbai along with his wife, Father
(Wholly Dependent) and the step child born on 30.09.1998 and twins born on
15.07.2001 and a child born on 31.10.2003. At the same time the Rail and Public
Transport was not available from Ahmedabad to Abu due to heavy rain. The
expenses incurred on such travel are as follows:<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Rail fare
per person from Ahmedabad to Mumbai (AC First Class)     Rs. 1000<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Rail fare
per person from Mumbai to Jaipur (AC First Class)                  Rs. 900<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Stay Exp
per person                                                </span></span><span style="font-size: 15px;">           </span><span class="apple-converted-space"><span style="font-size: 11pt;">           </span></span><span style="font-size: 15px;">               </span><span style="font-size: 11pt;">                  </span><span style="font-size: 11pt;">Rs.
600</span><span style="font-size: 11pt;">           </span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Other
Expenses including Food, entertainment etc.       </span></span><span style="font-size: 15px;">           </span><span style="font-size: 11pt;">                  </span><span style="font-size: 11pt;">Rs.
1500</span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;"><u><b>Other
important information:</b></u><o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">AC First
Class Rail Fare from Ahmedabad to Abu per person       </span></span><span style="font-size: 15px;">   </span><span style="font-size: 11pt;">      Rs. 760</span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">AC First
Class Rail Fare from Abu to Jaipur per person            </span></span><span style="font-size: 15px;">   </span><span style="font-size: 11pt;">                Rs.
400</span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">In
addition to the above information it is also stated that Mr. X took only one
journey during the last block of Four years and did not take any exemption and
also it is the first journey of Mr. X during the current block of 2010-13.<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Calculate
amount available for <a href="http://www.taxfinanceinfo.com/2013/10/leave-travel-allowance-lta-exemption.html">exemption U/s 10(5)</a> and also the amount that can be
brought forward and carried forward.<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><b><span style="font-size: large;">Solution:</span><span style="font-size: 11pt;"><o:p></o:p></span></b></span></div>
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<span class="apple-converted-space"><b><span style="font-size: 11pt;">Particulars                                                                              Amt.    <o:p></o:p></span></b></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Rail Fair from Ahmedabad to Abu (Note 1) (Rs.760*6)                      Rs.
4560<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">Rail Fair from Abu to Jaipur (Note 1) (Rs.400*6)         </span></span><span style="font-size: 15px; text-indent: 0.5in;">        </span><span style="font-size: 15px; text-indent: 0.5in;"> </span><span style="font-size: 15px; text-indent: 0.5in;">   </span><span style="font-size: 15px; text-indent: 0.5in;"> </span><span style="font-size: 15px; text-indent: 0.5in;">    </span><span style="font-size: 11pt; text-indent: 0.5in;">          </span><u style="font-size: 11pt; text-indent: 0.5in;">Rs.
2400</u></div>
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<span class="apple-converted-space"><b><span style="font-size: 11pt;">Total Exemption available U/s 10(5)       </span></b></span><span style="font-size: 15px; text-indent: 0.5in;">           </span><span style="font-size: 15px; text-indent: 0.5in;"> </span><span style="font-size: 15px; text-indent: 0.5in;">   </span><span style="font-size: 15px; text-indent: 0.5in;"> </span><span style="font-size: 15px; text-indent: 0.5in;"> </span><b style="text-indent: 0.5in;"><span style="font-size: 11pt;">                  Rs. 6960</span></b></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">The
Balance Amount Rs.3040 (Rs.10,000-Rs.6,960) is Taxable along with salary.<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">The
assessee can carry forward the exemption of Rs. 10,000 to the First Calendar
year of the next block as he has travelled only once in the current block.<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">In the
case where he took the only single journey in the previous block he cannot Brought
Forward any exemption   as the First Calendar Year of the current year
has lapsed.<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><u><span style="font-size: large;"><b>Notes:</b></span><span style="font-size: 11pt;"><o:p></o:p></span></u></span></div>
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<span style="font-size: 11pt;">1)<span style="font-size: 7pt;">     
</span></span><span class="apple-converted-space"><span style="font-size: 11pt;">Even when Mr. X has travelled to Jaipur
Via Mumbai the fare of the same will not be allowed as an exemption. The
exemption is available only on the fare by shortest distance as per the act and
in case where there is an absence of the recognized public transport system, AC
First Class Rail Fare for the distance of the journey by the shortest route, as
if the journey has been performed by rail. The second thing is fare of only 6 people
are only considered as only children born after 01.10.1998 are considered </span></span><span style="font-size: 11pt;">including Step Child and Adopted Child as <span class="apple-converted-space">children born out of multiple births (i.e. twins,
triplets, quadruplets, etc.) after the first child will be treated as single
child</span> but the same would not be in the case when there are already
multiple children at first, so exemption could not be availed on last child
born on 31.10.2003.<o:p></o:p></span></div>
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<span class="apple-converted-space"><b><span style="font-size: large;">Certain Points regarding Expert Knowledge:</span><span style="font-size: 11pt;"><o:p></o:p></span></b></span><br />
<span class="apple-converted-space"><b><span style="font-size: 11pt;"><br /></span></b></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">-<span style="font-size: 7pt;">         
</span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">It was heard in the case of <b>PSU Bank Employee v/s Chandigarh bench of
the Income Tax Appellate Tribunal (ITAT)</b> that, if the employee is
travelling by air across India, the air ticket should only comprise of air fare
paid for travelling in India and must not include any fare for travelling
overseas to avail exemption on Leave Travel Allowance received from Employer
and also added that exemption will not be provided even if the Air fare for
reaching at Indian desination is disclosed separately in the Air Ticket i.e.
exemption is not available on the entire cost including foreign travel as well
as on amount paid for partial Indian Travel.<o:p></o:p></span></span><br />
<span class="apple-converted-space"><span style="font-size: 11pt;"><br /></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">-<span style="font-size: 7pt;">     </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">In case of restriction of travelling with the
number of children born after 1.10.1998, children born out of multiple births
(i.e. twins, triplets, quadruplets, etc.) after the first child will be treated
as a single child. <o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">-<span style="font-size: 7pt;">      </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">In case an assessee and his/her spouse
both receive <a href="http://www.taxfinanceinfo.com/2013/10/leave-travel-allowance-lta-exemption.html">LTA</a> they can adjust their Travel allowance and can travel every
year as they can avail total 4 exemptions twice for both in a block of four
years. But they both cannot take an exemption for a single journey<o:p></o:p></span></span></div>
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Example of Leave Travel Allowance (LTA) Exemption Calculation

Example of Leave Travel Allowance (LTA) Exemption Calculation Example of Leave Travel Allowance (LTA) Exemption Calculation Exam...

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Leave Travel Allowance (LTA) Exemption Calculation

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<span style="font-size: large;"><b>Leave Travel Allowance (LTA) Exemption Calculation</b></span></div>
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Leave Travel Allowance (LTA) Exemption <a href="http://www.taxfinanceinfo.com/2013/10/example-of-leave-travel-allowance-lta.html">Calculation</a></div>
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<b><span style="font-size: large;">What is Leave Travel Allowance?</span></b><br />
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<span class="apple-converted-space"><span style="font-size: 11pt;">Leave
Travel Allowance is a concept of providing an extra benefit by the employer to
his employee by compensating or paying a certain amount to meet the travel
expenses incurred by him for himself as well as his family during the time of
service. It is taxable under the head “Income from Salaries” subject to
exemption under section 10(5) of The Income Tax Act. The section stated in the
Act is as follows:<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: large;"><b>Section: 10(5)</b></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;"><br /></span></span></div>
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<span class="apple-converted-space"><i><span style="font-size: 11pt;">“In the case of an individual, the value
of any travel concession or assistance received by, or due to, him,-<o:p></o:p></span></i></span></div>
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<span class="apple-converted-space"><i><span style="font-size: 11pt;">(a)<span style="font-size: 7pt; font-style: normal;">   </span></span></i></span><span class="apple-converted-space"><i><span style="font-size: 11pt;">From his employer for himself and his
family, in connection with his proceeding or leave to any place in India;<o:p></o:p></span></i></span></div>
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<span class="apple-converted-space"><i><span style="font-size: 11pt;">(b)<span style="font-size: 7pt; font-style: normal;">   </span></span></i></span><span class="apple-converted-space"><i><span style="font-size: 11pt;"> From his employer or former employer for
himself and his family, in connection with his proceeding to any place in India
after retirement from service or after termination of his service,<o:p></o:p></span></i></span></div>
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<span class="apple-converted-space"><i><span style="font-size: 11pt;">Subject to such conditions as may be
prescribed (including conditions as to number of journeys and the amount which
shall be exempt per head) having regard to travel concession or assistance
granted to the employees of the Central Government:<o:p></o:p></span></i></span></div>
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<span class="apple-converted-space"><b><i><span style="font-size: 11pt;">Provided
</span></i></b></span><span class="apple-converted-space"><i><span style="font-size: 11pt;">that the amount exempt under
this clause shall in no case exceed the amount of expenses actually incurred
for the purpose of such travel.”<o:p></o:p></span></i></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">[Family
in relation to individual means:<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">i)<span style="font-size: 7pt;">           </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">The spouse and children of the individual;
and <o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">ii)<span style="font-size: 7pt;">       </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">The parents, brothers and sisters of the
individual or any of them, wholly or mainly dependent on the individual.]<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 8pt;"><br /></span></span></div>
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<span class="apple-converted-space"><span style="text-align: left;"><b>To understand properly: <a href="http://www.taxfinanceinfo.com/2013/10/example-of-leave-travel-allowance-lta.html">Examples of LTA</a></b></span></span></div>
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<span class="apple-converted-space"><b><span style="font-size: large;"><br /></span></b></span></div>
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<span class="apple-converted-space"><b><span style="font-size: large;">The conditions prescribed by an Act to
avail exemption of LTA:</span><span style="font-size: 11pt;"><o:p></o:p></span></b></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">-<span style="font-size: 7pt;">         
</span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">The exemption is available only if the
employee has actually taken the leave from the company and travelled and such
travel expenditure is incurred for travelling in India. <o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;"><br /></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;">-<span style="font-size: 7pt;">         
</span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">LTA is exempt to the extent Travel cost
actually incurred i.e. no other expenses such as stay, food, etc. are covered.<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;"><br /></span></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 13.5pt; margin-right: 0in; margin-top: 0in; mso-list: l4 level1 lfo3; text-align: justify; text-indent: -.25in;">
<span class="apple-converted-space"><span style="font-size: 11pt;">-<span style="font-size: 7pt;">        </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">The exemption is available for two
journeys in a block of four calendar years which started from 1986-1989 and the
current block is 2010-2013. <o:p></o:p></span></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 13.5pt; margin-right: 0in; margin-top: 0in; mso-list: l4 level1 lfo3; text-align: justify; text-indent: -.25in;">
<span class="apple-converted-space"><span style="font-size: 11pt;"><br /></span></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 13.5pt; margin-right: 0in; margin-top: 0in; mso-list: l4 level1 lfo3; text-align: justify; text-indent: -.25in;">
<span class="apple-converted-space"><span style="font-size: 11pt;">-<span style="font-size: 7pt;">    </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">The Act provides with one more benefit
with respect to the above condition that if an assessee has not travelled in
the previous block than he can avail exemption of the same in the first
calendar year of the next block along with the two exemptions for the same
block.<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;"><br /></span></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 13.5pt; margin-right: 0in; margin-top: 0in; mso-list: l4 level1 lfo3; text-align: justify; text-indent: -.25in;">
<span class="apple-converted-space"><span style="font-size: 11pt;">-<span style="font-size: 7pt;">       </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">The maximum amount for which exemption can
be availed can be calculated from the limits provided by Act depending upon the
mode of Transportation used or available by/to the assessee. Such limits are as
follows:<o:p></o:p></span></span></div>
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<span class="apple-converted-space"><span style="font-size: 11pt;"><br /></span></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 13.5pt; margin-right: 0in; margin-top: 0in; text-align: justify;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: 13.5pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184;">
 <tbody>
<tr>
  <td colspan="2" style="border: solid black 1.0pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 465.3pt;" width="620"><div align="center" class="indent1a" style="margin-bottom: .0001pt; margin: 0in; text-align: center;">
<span class="apple-converted-space"><b><span style="font-size: 11pt;">Applicable for Journeys
  performed after 30/09/1997<o:p></o:p></span></b></span></div>
</td>
 </tr>
<tr>
  <td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 243.9pt;" width="325"><div class="indent1a" style="margin-bottom: .0001pt; margin: 0in;">
<span class="apple-converted-space"><b><span style="font-size: 11pt;">Mode of Transport<o:p></o:p></span></b></span></div>
</td>
  <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 221.4pt;" width="295"><div align="center" class="indent1a" style="margin-bottom: .0001pt; margin: 0in; text-align: center;">
<span class="apple-converted-space"><b><span style="font-size: 11pt;">Available Exemption<o:p></o:p></span></b></span></div>
</td>
 </tr>
<tr>
  <td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 243.9pt;" valign="top" width="325"><div class="indent1a" style="margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<span class="apple-converted-space"><span style="font-size: 11pt;">By Air<o:p></o:p></span></span></div>
</td>
  <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 221.4pt;" valign="top" width="295"><div class="indent1a" style="margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<span class="apple-converted-space"><span style="font-size: 11pt;">Economy
  Class fare of the National Airways (Indian Airlines or Air India), by the
  shortest possible route to the place of destination.<o:p></o:p></span></span></div>
</td>
 </tr>
<tr>
  <td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 243.9pt;" valign="top" width="325"><div class="indent1a" style="margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<span class="apple-converted-space"><span style="font-size: 11pt;">Where
  place of origin of journey and destination are provided with the rail and the
  journey is performed by any mode of transport other than by air<o:p></o:p></span></span></div>
</td>
  <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 221.4pt;" valign="top" width="295"><div class="indent1a" style="margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<span class="apple-converted-space"><span style="font-size: 11pt;">AC
  First Class rail fare by the shortest route to the place of destination.<o:p></o:p></span></span></div>
</td>
 </tr>
<tr>
  <td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 243.9pt;" valign="top" width="325"><div class="indent1a" style="margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<span class="apple-converted-space"><span style="font-size: 11pt;">Where
  the place of origin and destiny or part thereof are not connected by rail<o:p></o:p></span></span></div>
</td>
  <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 221.4pt;" valign="top" width="295"><div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 12.6pt; margin-right: 0in; margin-top: 0in; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -12.6pt;">
<span class="apple-converted-space"><span style="font-size: 11pt;">i)<span style="font-size: 7pt;">   
  </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">Where a recognized public transport
  system exists, the first class or deluxe class fare on such transport by the
  shortest route.<o:p></o:p></span></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 12.6pt; margin-right: 0in; margin-top: 0in; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -12.6pt;">
<span class="apple-converted-space"><span style="font-size: 11pt;">ii)<span style="font-size: 7pt;">  </span></span></span><span class="apple-converted-space"><span style="font-size: 11pt;">In the
  absence of above, AC First Class Rail Fare for the distance of the journey by
  the shortest route, as if the journey has been performed by rail.<o:p></o:p></span></span></div>
</td>
 </tr>
</tbody></table>
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<span style="font-size: 11pt;"><br /></span></div>
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<span style="font-size: 11pt;">-<span style="font-size: 7pt;">         
</span></span><span style="font-size: 11pt;">In
respect of availing exemption for travelling with children the points to be
kept in mind are as follows:<o:p></o:p></span></div>
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<span style="font-size: 11pt;"><br /></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-list: l0 level2 lfo5; text-align: justify; text-indent: -.25in;">
<span style="font-family: 'Courier New'; font-size: 11pt;">o<span style="font-family: 'Times New Roman'; font-size: 7pt;">  
</span></span><span style="font-size: 11pt;">If the
journey is performed on or before 1.10.1998 exemption is available for all the
children who travel along with the assessee.<o:p></o:p></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-list: l0 level2 lfo5; text-align: justify; text-indent: -.25in;">
<span style="font-size: 11pt;"><br /></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-list: l0 level2 lfo5; text-align: justify; text-indent: -.25in;">
<span style="font-family: 'Courier New'; font-size: 11pt;">o<span style="font-family: 'Times New Roman'; font-size: 7pt;">  
</span></span><span style="font-size: 11pt;">But
if the journey is performed after 1.10.1998 <o:p></o:p></span></div>
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.25in; margin-right: 0in; margin-top: 0in; mso-list: l0 level3 lfo5; text-align: justify; text-indent: -.25in;">
<span style="font-family: Wingdings; font-size: 11pt;">§<span style="font-family: 'Times New Roman'; font-size: 7pt;"> 
</span></span><span style="font-size: 11pt;">Exemption
can be availed for all the children born before 1.10.1998<o:p></o:p></span></div>
<br />
<div class="indent1a" style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.25in; margin-right: 0in; margin-top: 0in; mso-list: l0 level3 lfo5; text-align: justify; text-indent: -.25in;">
<span class="apple-converted-space"><span style="font-family: Wingdings; font-size: 11pt;">§<span style="font-family: 'Times New Roman'; font-size: 7pt;">  </span></span></span><span style="font-size: 11pt;">For the children born after 1.10.1998,
exemption is available only for two surviving children. It also includes Step
Child and Adopted Child.<span class="apple-converted-space"><o:p></o:p></span></span></div>
<br />
<b>To understand properly: <a href="http://www.taxfinanceinfo.com/2013/10/example-of-leave-travel-allowance-lta.html">Examples of LTA</a></b><br />
<br /></div>

Leave Travel Allowance (LTA) Exemption Calculation

Leave Travel Allowance (LTA) Exemption Calculation Leave Travel Allowance (LTA) Exemption Calculation What is Leave Travel Allowan...

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Example of House Rent Allowance (HRA) Exemption Calculation

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<b><span style="font-size: large;">Example of House Rent Allowance (HRA) Exemption Calculation</span></b></div>
<br />
Example of <a href="http://www.taxfinanceinfo.com/2013/10/house-rent-allowance-hra-exemption.html">House Rent Allowance (HRA)</a> Exemption Calculation<br />
<br />
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<img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLL3bLwDQw1N5HR52txK7KUuEKsazrQk3P5ffAYsU4Tr2_HS28Q5jYSvbKqLLseXF6hfXvwIVeiy5jqCznFa2aNmc58TjHQvtcCvh8_YMIlqA9K_fpvnMqVLhCt8H4lAMPaVNUCYtWeHjj/s1600/example+of+hra.jpg" width="400" /></div>
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<div class="MsoNormal" style="margin-bottom: 4pt; text-align: justify;">
<b><span style="font-size: large;">Example:</span><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: 4pt; text-align: justify;">
<b><br /></b></div>
<div class="MsoNormal" style="margin-bottom: 4pt; text-align: justify;">
Calculate the available exemption of <a href="http://www.taxfinanceinfo.com/2013/10/house-rent-allowance-hra-exemption.html">HRA</a> from
the following details: (Monthly)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Basic Pay                                                                             :  Rs.40,000<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Dearness Allowance                                                      :  Rs.5,000<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Entertainment Allowance                                            :  Rs.1,500<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
House Rent Allowance                                                 :  Rs. 10,000<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Rent per Month                                                               :  Rs. 12,000<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Place of Accommodation                                           :  Non-Metro<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Place of Work                                                                  :  Metro<o:p></o:p></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: 4pt; margin-left: 0in; text-align: justify;">
<b><br /></b></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: 4pt; margin-left: 0in; text-align: justify;">
<b><span style="font-size: large;"><u>Solution:</u></span><o:p></o:p></b></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 0in; text-align: justify;">
For the
purpose of calculating HRA, least of the following is considered:<o:p></o:p></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 58.5pt; text-align: justify; text-indent: -0.25in;">
1.<span style="font-size: 7pt;">      
</span>Actual HRA Received                                                                   Rs.10,000<o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 58.5pt; text-align: justify; text-indent: -0.25in;">
2.<span style="font-size: 7pt;">      
</span>Actual Rent Paid Less 10% of Basic Salary  (Note 1)          Rs.
7,500<o:p></o:p></div>
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3.<span style="font-size: 7pt;">      
</span>40% of the Basic Salary (Note 2)                                                  Rs.18,000<o:p></o:p></div>
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<div class="MsoNormal" style="margin-bottom: 4pt; text-align: justify; text-indent: -0.5pt;">
Thus <b>Rs.7,500</b> will be available as an
Exemption under section 10(13A) and remaining Rs. 2,500 (10,000-7,500) will be
taxable.<o:p></o:p></div>
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<b><u><span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">:: Working
Notes ::<o:p></o:p></span></u></b></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.5pt;">
<b><u>Note 1</u>:
Calculation of Actual Rent Paid Less 10% of Basic Salary</b><o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: 0.5in;">
Actual Rent paid                                            Rs.12,000<o:p></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.5pt;">
  Less:   10% of Basic Salary*                                    <u>Rs. 4,500<o:p></o:p></u></div>
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                                                                                            <u>Rs.
7,500<o:p></o:p></u></div>
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<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.7pt;">
<b>*Basic Salary</b> =  Basic Pay +
Dearness Allowance = Rs.40,000 + Rs.5,000 = 45000<o:p></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.7pt;">
<br /></div>
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  10% of Basic Salary = Rs
45,000 * 10% = Rs. 4,500.<o:p></o:p></div>
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<br /></div>
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(Here Entertainment allowance is not to be considered as other
allowances and perquisites are not to be considered).<o:p></o:p></div>
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<br /></div>
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<b><u>Note 2</u>:
Calculation of 40% of Basic Salary</b><o:p></o:p></div>
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<br /></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">(*)
Basic Salary as calculated above - 40% (Non -Metro) = 45000 * 40% = Rs, 18,000.</span></div>
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<br /></div>
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<span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">(Here the point to be kept in mind is 40% of the
Basic Salary is to be considered as the accommodation is in a non – metro. If
the accommodation would be in metro, 50% of the Basic salary would have been
taken into consideration)</span></div>
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_____________________________________________________________________________</div>
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<b><span style="font-size: large;">Extension
of Example:</span><o:p></o:p></b></div>
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<b>Calculate <a href="http://www.taxfinanceinfo.com/2013/10/house-rent-allowance-hra-exemption.html">HRA</a> for a whole year with
the above figures and certain changes as follows:</b><o:p></o:p></div>
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<br /></div>
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- 
Dearness Allowance does not form part of salary as provided in terms of
employment<o:p></o:p></div>
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<br /></div>
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- The employee actually resided at the rented accommodation from
June to March and in a rent free accommodation during April and May. The
employer started to pay HRA when the employee started to reside in rented accommodation.<o:p></o:p></div>
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- Rent Actually paid is Rs. 10,000 per month for the months from
June to December and Rs.12,000 per month from January to March.<o:p></o:p></div>
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<b><span style="font-size: large;"><u>Solution:</u></span><o:p></o:p></b></div>
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<b><br /></b></div>
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In the above case calculation is to be
made by dividing the different parts of a year when there is change in any
parameter i.e. basic pay, actual rent paid, actual HRA received, etc.<o:p></o:p></div>
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<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"> Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;"> 
</span></span><b>For April
and May:<o:p></o:p></b></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
No exemption will be availed for the Months of
April & May as there is no any Rent paid by the Employee as well as there
is no any HRA received.<o:p></o:p></div>
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<o:p><br /></o:p></div>
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<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"> Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;">  </span></span><b>For the months from June to December:<o:p></o:p></b></div>
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<br /></div>
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Least of
the following is considered:<o:p></o:p></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 58.5pt; text-align: justify; text-indent: -0.25in;">
1.<span style="font-size: 7pt;">      
</span>Actual HRA Received (Rs.10,000 * 7)                                                              Rs.
 70,000<o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 58.5pt; text-align: justify; text-indent: -0.25in;">
2.<span style="font-size: 7pt;">      
</span>Actual Rent Paid Less 10% of Basic Salary     (Note 1)                        Rs.
 42,000<o:p></o:p></div>
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3.<span style="font-size: 7pt;">      
</span>40% of the Basic Salary (Note 2)                                                                      Rs.1,12,000<o:p></o:p></div>
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<br /></div>
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Thus <b>Rs.42,000</b> will be available as an <a href="http://www.taxfinanceinfo.com/2013/10/house-rent-allowance-hra-exemption.html">Exemption under section 10(13A)</a>
for the respective period.<o:p></o:p></div>
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<br /></div>
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<b><span style="font-size: large;">:: Working Notes ::</span></b></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.5pt;">
<b><u>Note 1</u>:
Calculation of Actual Rent Paid Less 10% of Basic Salary</b><o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: 0.5in;">
 Actual Rent paid  (Rs.
10,000*7)                                  Rs.70,000<o:p></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.5pt;">
  Less:   10% of Basic Salary [(Rs. 40,000*7)*10%]                 <u>Rs. 28,000<o:p></o:p></u></div>
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                                            <span style="text-indent: -0.5pt;">                    </span><span style="text-indent: -0.5pt;">                                                     </span><u style="text-indent: -0.5pt;">Rs.
42,000</u></div>
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<br /></div>
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<br /></div>
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(Here Entertainment allowance is not to be considered as other
allowances and perquisites are not to be considered and dearness allowance is
also not to be considered as it is not a part of basic salary as per employment
terms).<o:p></o:p></div>
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<o:p><br /></o:p></div>
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<br /></div>
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<b><u>Note 2</u>:
Calculation of 40% of Basic Salary</b><o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.5pt;">
Basic Salary as calculated above - 40%
(Non-Metro) = (40000*7) * 40% = Rs. 1,12,000.<o:p></o:p></div>
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<o:p><br /></o:p></div>
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<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"> Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;">  </span></span><b>For the months from January to March:<o:p></o:p></b></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 0in; text-align: justify;">
<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 0in; text-align: justify;">
Least of
the following is considered:<o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 58.5pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 58.5pt; text-align: justify; text-indent: -0.25in;">
1.<span style="font-size: 7pt;">      
</span>Actual HRA Received (Rs.10,000 * 3)                                                        Rs.30,000<o:p></o:p></div>
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2.<span style="font-size: 7pt;">      
</span>Actual Rent Paid Less 10% of Basic Salary     (Note 1)                     Rs.24,000<o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 4pt; margin-left: 58.5pt; text-align: justify; text-indent: -0.25in;">
3.<span style="font-size: 7pt;">      
</span>40% of the Basic Salary (Note 2)                                                                Rs.48,000<o:p></o:p></div>
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<br /></div>
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Thus <b>Rs.24,000</b> will be available as an Exemption under section 10(13A)
for the respective period.<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center; text-indent: -0.5pt;">
<b><span style="font-size: large;">:: Working Notes ::</span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.5pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.5pt;">
<b><u>Note 1</u>:
Calculation of Actual Rent Paid Less 10% of Basic Salary</b><o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: 0.5in;">
 Actual Rent paid  (Rs. 12,000*3)                                   Rs. 36,000<o:p></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.5pt;">
  Less:   10% of Basic Salary [(Rs. 40,000*3)*10%]                  <u>Rs. 12,000<o:p></o:p></u></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.5pt;">
                                                                                         <span style="text-indent: -0.5pt;">                    </span><span style="text-indent: -0.5pt;">         </span><u style="text-indent: -0.5pt;">Rs. 24,000</u></div>
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<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.7pt;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.7pt;">
(Here Entertainment allowance is not to be considered as other
allowances and perquisites are not to be considered and dearness allowance is
also not to be considered as it is not a part of basic salary as per employment
terms).<o:p></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.7pt;">
<o:p><br /></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 31.5pt; text-align: justify; text-indent: -0.7pt;">
<br /></div>
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<b><u>Note 2</u>:
Calculation of 40% of Basic Salary</b><o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.5pt;">
Basic Salary as calculated above - 40%
(Non-Metro) = (40000*3) * 40% = Rs. 48,000.<o:p></o:p></div>
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<o:p><br /></o:p></div>
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<br /></div>
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<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"> Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;"> 
</span></span><b>Total <a href="http://www.taxfinanceinfo.com/2013/10/house-rent-allowance-hra-exemption.html">HRAExemption</a> for the Year:<o:p></o:p></b></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.7pt;">
Total HRA Received for the Year                                   : Rs.1,00,000<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.7pt;">
           (Rs.10,000*10 Months)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.7pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.7pt;">
<b>Exemption available:</b><u><o:p></o:p></u></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: 0.5in;">
April & May                                                  :
NIL<o:p></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: 0.5in;">
June to December                                   :
Rs. 42,000<o:p></o:p></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify; text-indent: 0.5in;">
January to March                                    :
<u>Rs. 24,000</u><u><o:p></o:p></u></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 1in; text-align: justify; text-indent: 0.5in;">
<b style="text-indent: 0.5in;">Total                                                 : <u>Rs. 66,000</u></b></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 1in; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
Taxable HRA to be included in Salary                              :
Rs.34,000<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
        (Rs. 1,00,000-Rs,66,000)<o:p></o:p></div>
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<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
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<span style="font-size: large;"><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"> §<span style="font-family: 'Times New Roman';"> 
</span></span></span><b><span style="font-size: large;">Conclusion:</span><o:p></o:p></b></div>
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<b><br /></b></div>
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From the
above calculation it can be concluded that the least HRA will be Actual Rent
paid less 10% of Basic Salary in normal situation. But the same will change in
the special case where the Actual Rent paid is very high as compared to the
actual HRA received.<o:p></o:p></div>
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Example of House Rent Allowance (HRA) Exemption Calculation

Example of House Rent Allowance (HRA) Exemption Calculation Example of House Rent Allowance (HRA) Exemption Calculation Exampl...

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House Rent Allowance (HRA) Exemption Calculation

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<span style="font-size: large;"><b>House Rent Allowance (HRA) Exemption Calculation</b></span></div>
<br />
House Rent Allowance (HRA) Exemption Calculation<br />
<br />
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<img border="0" height="211" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlr9GIgmPKL7goHUgc3acXkQ-YLC_4IMjtel_mcF1_rf7rgVOABwaaYn990CAQo2ZfEKQgvrQDWb8PFzLI0smxGnEW9kt1yhoWBc5_0fkiUn6aJUKoyh9Vy61JV9wngoPqAP92Hia1OxNN/s1600/HRA+calculation.jpg" width="400" /></div>
<br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<b><span style="line-height: 115%;"><span style="font-size: large;">What
is HRA?</span><span style="font-size: small;"><o:p></o:p></span></span></b></div>
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House
Rent Allowance basically means the compensation received along with Salary, by
an employee from his employer towards Rent paid by the employee for his
accommodation. When the salary received by an employee in excess of the basic
exemption limit is taxable as per The Income Tax Act, The same provides
exemption under section 10 (13A) for the House Rent Allowance received by the
employee. <o:p></o:p></div>
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<b><span style="line-height: 115%;"><span style="font-size: large;">Section 10(13A):</span><span style="font-size: small;"><o:p></o:p></span></span></b></div>
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<i> “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 assesse, to such extent as may be prescribed having regard to the area
or place in which such accommodation is situated and other relevant
considerations.”<o:p></o:p></i></div>
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While <b>Rule
2A</b> provides us with the consideration for the calculation of exemption that
can be availed for HRA:<span style="font-size: 13.5pt;"><o:p></o:p></span></div>
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<b><span style="font-size: large;">HRA
Exemption Calculation:</span><span style="font-size: small;"><o:p></o:p></span></b></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><br /></span></b></div>
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HRA
exemption is granted with amount derived from Least of the following three
amounts:<o:p></o:p></div>
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1.<span style="font-size: 7pt;">      
</span>House Rent Allowance actually received by the
employee<o:p></o:p></div>
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2.<span style="font-size: 7pt;">      
</span>Actual rent paid less 10% of Basic Salary<o:p></o:p></div>
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3.<span style="font-size: 7pt;">      
</span>50% of the Basic Salary in case the
accommodation is in Metro else 40% of the Basic Salary if the accommodation is
in a non metro<o:p></o:p></div>
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<span style="font-size: large;"><b>Examples of the <a href="http://www.taxfinanceinfo.com/2013/10/example-of-house-rent-allowance-hra.html">HRA Exemption</a> Calculation</b></span></div>
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<b><span style="font-size: large;">Important
Points to be kept in mind for availing the exemption of HRA:</span><span style="font-size: small;"><o:p></o:p></span></b></div>
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<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;"> 
</span></span>HRA is received by the salaried employee only
so it is available as an exemption for salaried employee only and not to the
self employed people.<o:p></o:p></div>
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<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;"> 
</span></span>The employee must have actually paid the rent
for the accommodation i.e. he must not be residing at his own house or at any
other place where he is not supposed to pay any consideration. Cross Check for
this purpose is there as assessee has to provide the receipt for Rent paid with
the details such as name of the landlord, tenant, Address of the accommodation,
Amount of Rent paid, etc.<o:p></o:p></div>
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<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;"> 
</span></span>If the employee resides at a rented
accommodation for a part of the financial year than the HRA can be claimed on
proportionate basis. (We will understand the same more clearly with the help of
an example at the end.)<o:p></o:p></div>
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<br /></div>
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<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;"> 
</span></span>The basic Salary to be considered for the
purpose of calculating HRA includes Basic pay, dearness allowance, if provided
in terms of employment and commission as per fixed percentage of turnover (if
received). (All other perquisites and allowances are excluded).<o:p></o:p></div>
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<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt;"> 
</span></span>When the assessee is working in a metro and
residing in a non-metro, and the rent is paid for such accommodation than, 40%
of the basic salary is to be considered when calculating HRA as per least of 3
rule. Because the place of accommodation is an important factor.</div>
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<span style="font-size: large; text-indent: 0px;"><b>Examples of the <a href="http://www.taxfinanceinfo.com/2013/10/example-of-house-rent-allowance-hra.html">HRA Exemption</a> Calculation</b></span></div>
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House Rent Allowance (HRA) Exemption Calculation

House Rent Allowance (HRA) Exemption Calculation House Rent Allowance (HRA) Exemption Calculation What is HRA? House Rent Allo...

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