Question

If rent is paid for a house situated in Mumbai, while calculating the exempted value of the house rent allowance, ________of salary will be considered under Section 10(13A) of the Income Tax Act, 1961.
1. 40 percent
2. 20 percent
3. 50 percent
4. 30 percent

Answer 1

Correct Answer - Option 3 : 50 percent

The correct answer is 50 percent. 

• House Rent Allowance: House Rent Allowance (HRA) is a salary component paid by an employer to employees to help with the cost of living in the city in which the employee works.
• The exemption rule and tax deduction of the house rent allowance are mentioned under Section 10(13A) of the Income Tax Act, 1961.

Tax Exemption From HRA Calculation:

The deduction available is the least of the following amounts

• Actual HRA received
• For persons living in metro cities, the HRA will be calculated as 50% of [basic salary + Dearness Allowance].
• For persons living in non-metro cities, the HRA will be calculated as 40% of [basic salary + Dearness Allowance]
• Actual rent paid less than 10% of [basic salary + Dearness Allowance]