All about House Rent Allowances and Exemptions 

It is common that in the case of Salary payment, the employer breaks up the salary into many components so that the employee can get maximum benefits under the Income Tax provisions. 

One such component of Salary break up is House Rent Allowance. There are situations when the employee does not own self house and has to live in rental premises. In order to get the benefit of deduction available in Income Tax in respect of House Rent Allowance, the salary is structured in such a way that maximum exemption is available to the employee. 

Here we will look at the provisions of the Income Tax Act regarding the House Rent Allowance and its exemptions. 

Section 10(13A) of the Income Tax Act provides that : 

(13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant considerations.

Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where—

(a) the residential accommodation occupied by the assessee is owned by him ; or

(b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him ;<