Example:-X has received following amount during the previous year. Basic Salary 7,000 p.m.; Dearness Allowance (D.A) – 1,000 p.m.;House Rent Allowance (H.R.A.) 3,000 p.m. The Actual Rent Paid is 3,000 p.m. Calculate exemption of HRA u/s 10(13A)

The minimum of the following amount shall be exempt

·         Actual HRA received (3,000*12) = 36,000/-

·         Rent Paid in excess of 10% of salary ( 36,000-9,600) = 26400

·         40% of Salary = 38,400/-

Therefore, 26,400 shall be exempt and the balance 9,600 shall be included in gross salary.