Below is the tax treatment for HRA
If an employee stays with his parents, he/she can claim pay rent to their parents, provided that the parents own the house in which he is staying.
If you stay in a rented house and the rent paid by you is in excess of Rs 8,333 per month, you must mandatorily provide the landlord’s PAN details.
Mr ABC lives in Delhi. He earns a monthly basic salary of Rs 20,000 Monthly HRA Salary Component is Rs 12000/-.The monthly rent which he pays his landlord is Rs 7000/-
How much exemption will ABC get?
Actual HRA salary component received. = Rs 12000/-
Actual Rent paid by the employee – 10% basic salary : = [7000 – ( 10% *20000)] = Rs 5000
(……………) % of basic salary = Rs 10000/-
As ABC is staying in a Metro, the calculation would be 50 % of basic salary
Least of above is Rs 5000/-
Hence Rs 5000/- would be exempt from his HRA Salary component and balance would be taxable.
i.e Rs 12000 – Rs 5000 = Rs 7000.