Sunitha earns a basic salary of Rs 40,000 per month and rents an apartment in Delhi for Rs 20,000 per month (hence eligible for a 50% of the basic pay for HRA exemption). The actual HRA she receives is Rs 25,000.
These values are considered to find out her HRA tax exemption:
a. Actual HRA received, i.e. Rs 25,000,
b. 50% of the basic salary, i.e. Rs 20,000, and
c. Excess of rent paid over 10% of salary, i.e. Rs 20,000 – Rs 4,000 = Rs 16,000
The value considered for her actual HRA exemption will be the least value of the above figures. Hence, the net taxable HRA for Sunitha will be Rs. 25,000 – 16,000 (available HRA deduction) = Rs. 9,000.
