HRA stands for House Rent Allowance. It is taxable under the IT Act subject to specified exemption limits. If you do one of the following then your HRA is fully taxable, not exempt:
Reside in your own house; or Do not pay rent for house occupied by you.
However if you are living in a rented house and you are the one paying the rent, then HRA exemption can be availed for the period during which you occupy the rented house during the relevant tax year. Also, to claim the exemption, your employer is required to obtain appropriate and adequate proof of payment of rent for the entire period for which you want to claim exemption. An exception to the 'proof required' rule is that if you are a salaried employee drawing HRA up to Rs. 3,000 per month, you do not have to provide a rent receipt to your employer.Exemption amount is calculated as follows:
In Metro cities:
The least of Actual HRA / Rent in excess of 10% of salary / 50% of salary
In other cities:
The least of Actual HRA / Rent in excess of 10% of salary / 40% of salary
'Salary' for purposes of HRA includes dearness allowance if you're getting it, but excludes all other allowances and perquisites.
More understanding :-
Can I claim HRA if I live in a house that I own? No.
Can I claim HRA if I'm not currently paying any rent? No.
Can I claim both HRA and take home loan deduction benefit to save tax? Yes, as far as the IT Act is concerned – the two sections on HRA and Rental Income are completely separate, so you can avail HRA deduction and also home loan tax benefits. For example:Suppose you are renting a house close to where you work, but your home is elsewhere, and you are repaying a home loan on your home property. In this case you can avail your HRA deduction, as well as take the tax benefit of the home loan. The two sections (dealing with HRA and Home Loan benefit) are completely separate in the IT Act.
Showing posts with label anand dadhich of india. Show all posts
Showing posts with label anand dadhich of india. Show all posts
Tuesday, January 17, 2012
Wednesday, January 4, 2012
Salary Restructuring to Save Tax
Salary Restructuring is a lesser known domain of tax planning. You can structure or restructure your salary so as to reduce the tax outgo by including exempt allowances and reimbursements. Instead of going for a high basic salary you can take reimbursements and allowances which are exempt from tax.But note that your EPF, Gratuity and Superannuation are all a percentage of your Basic, so by reducing your Basic to allow for higher allowances and reimbursements, you will also be reducing your EPF, Gratuity and Superannuation. And note that EPF is exempt from tax, gratuity is exempt from tax up to Rs. 10 lakhs in your lifetime, and the commuted pension portion of Superannuation is non taxable.
Use Medical, Transport Allowance, Education Allowance, Food Coupons to Save Tax. Brief of each is given below for better understanding:
Medical Reimbursement:
The reimbursement of the medical expenses of you and/or your family members is exempt from tax to the extent of Rs.15,000 for the year. You should have bills for the amount claimed, for the relevant year.
Transport Allowance :
Transport allowance provided to you as an employee for commuting between your residence and your place of work is exempt up to Rs. 800 per month (i.e. Rs. 9,600 p.a.).
Education Allowances:
For those salaried employees who have children, education allowance of Rs. 100 per month per child for up to 2 children is exempted (i.e. Rs. 2400 p.a. totally). In case your children are in hostel, the exemption available is Rs.300 per month per child for up to 2 children.
Food Coupons :
Expenses incurred by your employer on provision of free/ subsidized meals to you during office hours at office or business premises, i.e. food coupons, are not taxable as a perquisite, only to the extent of Rs.50 per meal. The exemption is also available in case paid vouchers, which are non-transferable and usable only at eating joints, are provided to employees.
§ 'Free meals' means 'free food and non-alcoholic beverages'
§ There is no tax on tea or snacks during working hours;
§ Where free food and non-alcoholic beverages during working hours are provided in a remote area or an off shore installation, it is not taxable regardless of the value The exemption of Rs.50 per meal is available only in respect of meals during office hours.
Use Medical, Transport Allowance, Education Allowance, Food Coupons to Save Tax. Brief of each is given below for better understanding:
Medical Reimbursement:
The reimbursement of the medical expenses of you and/or your family members is exempt from tax to the extent of Rs.15,000 for the year. You should have bills for the amount claimed, for the relevant year.
Transport Allowance :
Transport allowance provided to you as an employee for commuting between your residence and your place of work is exempt up to Rs. 800 per month (i.e. Rs. 9,600 p.a.).
Education Allowances:
For those salaried employees who have children, education allowance of Rs. 100 per month per child for up to 2 children is exempted (i.e. Rs. 2400 p.a. totally). In case your children are in hostel, the exemption available is Rs.300 per month per child for up to 2 children.
Food Coupons :
Expenses incurred by your employer on provision of free/ subsidized meals to you during office hours at office or business premises, i.e. food coupons, are not taxable as a perquisite, only to the extent of Rs.50 per meal. The exemption is also available in case paid vouchers, which are non-transferable and usable only at eating joints, are provided to employees.
§ 'Free meals' means 'free food and non-alcoholic beverages'
§ There is no tax on tea or snacks during working hours;
§ Where free food and non-alcoholic beverages during working hours are provided in a remote area or an off shore installation, it is not taxable regardless of the value The exemption of Rs.50 per meal is available only in respect of meals during office hours.
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