TAX tips.. exempt on HRA

Being an IT guy I never really had to know the nuances of finance. But being part of the a modern bachelor community has its own disadvantages.Such as, not knowing how much tax you are paying and how much you can actually get a tax exempt on. This post is an attempt to provide information on managing your financial liabilities better. In next few lines you would know how much of your annual HRA, you can get tax exempt on.  

 

According to the Income Tax Act, the amount of HRA exempt is the least of:

·        The actual HRA received during the time an accommodation is rented.

·        The amount by which rent expenditure exceeds 1/10 of the total salary amount during same period. So if this amount is let say x , then x=( rent expenditure – 1/10 of total salary ) during same period.

·        40% of the total salary during relevant period.

Here is an example.

Let say a person gets a total salary of 4 lakhs in which 2 lakhs is basic and 1.5 lakhs is HRA. He pays an annual rent of 1.2 lakhs and stays in rented accommodation throughout the year.

In this case, the amount of HRA exempt would be calculated as least of:

·        Actual HRA received i.e. 1.5 laks

·        x = 1.2 lakhs -  (1/10) X 4 lakhs =80,000

·        40% of 4 lakhs =1.6 lakhs

As the least of above is 80,000 only this amount will be exempt from tax. The remaining 70,000 of HRA will be subjected to tax. 

Hope this helps. 

Bihar ...changing fate.

It was one of those rare occasions when I watch news channels with both patience and interest. Bihar’s CM Nitish Kumar was chosen for ET leadership award for his effort towards the development of the state since he took over CM’s position. The news showed how the state which lived in darkness since ages, is on the fast track of growth from last 4 years.Today Bihar reports an amazing GDP growth rate of 11%, second only to Gujarat. The state's consistent economy since 2004 has all the indication that Bihar is on the right track.

Two days later I saw a full page special report in a national daily newspaper highlighting Bihar’s success story. The report presented few great facts and figures about the emerging Bihar. Infrastructure growth with a never before pace and effective crime control are among such achievements.

Didn’t know but it was a happy moment for me too. Not that I have equally contributed to this success but for a simple reason that somewhere at the bottom of my heart I felt proud to be a Bihari (a term used to describe a person from Bihar).

It may sound strange for a person having his roots in Bihar and upbringing in a typical Bihari family to say something like “Didn’t know”, but year’s long separation and the image the state portrays outside really never excites the prospects of associating oneself to state, who leaves it for better education or living. There are few who never leave the sense of belongingness, few can’t leave it ever even if they want, and then there are few who get compliments from colleagues and friends for not having a Bihari accent: “You are from Bihar? But you don’t sounds like one.”

My point is, may be all this bad name Bihar had earned in several years and the shame a few people might feel in telling which state they belong to, the face of Bihar is changing. It still has issues like poverty, health service, population density, floods but atleast its on right path and the signs are promising.

Bihar’s success story is indeed a reason to rejoice- as for a state that has lived long under the image of corruption, violence, poverty and backward growth; seeing it progressing at a rapid rate and getting its dues is satisfying feeling.