Including company lease in HRA?

My previous employer provided housing as perk (company lease) and amounted to ~65K; my new employer gives HRA & the amount will be ~40K making it ~ 105K for the full year. Can I claim HRA for only 40K or can I claim on the full amount. My first employer includes the amount as perk & doesnt classify it as part of deductions.

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  1. Hi Balakumar,

    Looks like you are confused over HRA and perqusites.

    You can claim exemption for the HRA portion. The details are as follows:

    An allowance granted to a person by his employer to meet expenditure incurred on payment of rent in respect of residential accommodation occupied by him is exempt from tax to the extent of least of the following three amounts:
    a) House Rent Allowance actually received by the assessee
    b) Excess of rent paid by the assessee over 10% of salary due to him(in your case, you will have to prorate the rent amount from the date you have joined this new organisation).
    c) An amount equal to 50% of salary due to assessee (If accommodation is situated in Mumbai, Kolkata, Delhi, Chennai)
    ‘Or’ an amount equal to 40% of salary (if accommodation is situated in any other place).

    Salary for this purpose includes Basic Salary, Dearness Allowance (if it forms part of salary for the purpose of retirement benefits), Commission based on fixed percentage of turnover achieved by the employee.

    A perk is an additional benefit provided by an employer, in cash or in kind, apart from regular salary and allowances. It may be in cash or in kind and results in a personal benefit to the employee.Valuation of rent-free unfurnished accommodation. For the purpose of valuation of rent-free unfurnished accommodation, the employees have been grouped as follows:

    (i)Union or State Government employees:-
    Union or State Government employees or Government employees on delegation to a public sector undertaking or a Government body.Valuation is taken at the rent that would have been payable by the employee in accordance with the rules framed by the Government for allotment of houses to its officers.

    (ii)Employees in private sector:-

    If accommodation is provided in cities other than Delhi, Mumbai, Calcutta and Chennai:
    a. If rent is 10% of Salary, taxable value is fair rent
    b. If rent is between 10% and 50% of Salary, taxable value is 10% of salary.
    c. If rent is 50% of Salary, taxable value is fair rent minus 40% of salary.

    If accommodation is provided in Delhi, Mumbai, Calcutta and Chennai,
    a. If fair rent is less than or equal to 10% of salary, taxable value is fair rent.
    b. If fair rent is more than 10% but less than 60% of salary, the taxable value is 10% is 10% of salary.
    c. If fair rent is more than 60%, taxable value is fair rent minus 50% of salary.

    Fair Rent
    Fair Rent is the municipal valuation of the accommodation, or rent which a similar accommodation would realize in the same locality, whichever is higher. However, it cannot exceed the standard rent, if any, fixed or determine under a Rent Control Act. If the employer hires the accommodation, Fair Rent Value is the actual rent paid for the accommodation.

    For the purpose of valuation of perks in respect of rent-free accommodation, salary includes the following:

    Basic Salary;
    Dearness Allowance/ pay if the terms of employment so provide;
    All other taxable allowances (however, allowances to the extent they are exempt need not be included);
    Income and professional taxes paid by the employer on behalf of his employee; and
    Electricity, gas , water supply expenses paid or reimbursed by an employer to his employees.
    However, salary does not include the following;

    Dearness allowance/ pay if it is not taken into account while calculating retirement benefits like provident fund, gratuity, etc. or if it does not form part of salary according to the terms of the employment;
    Employer’s Contribution to provident fund account of an employee;
    Entertainment allowances to the extent deductible from salary; and
    Value of perquisites .

    In the valuation of the value of prequisites, you would have to prorate the salary on the basis of number of days you were employed under your previous employer.

    In case, the accommodation you had was a furnished one, then:
    Calculate the perquisite value of unfurnished accommodation as per the applicable category.Add either of the following to value of the unfurnished accommodation so arrived at,10% of the original cost of furnishings, if the furnishings are owned by the employer, or the actual hire charges if the furnishings are taken on hire.

    Hope this helps. For further details, mail me at [email protected]