New Delhi – The Finance Ministry has provided a definitive clarification regarding House Rent Allowance (HRA) claims for Central government employees whose spouses have been allotted official accommodation. In a written reply to the Rajya Sabha, the ministry confirmed that an employee cannot claim HRA if their spouse has been provided government housing at the same station.
HRA: A Compensatory Allowance, Not a Universal Entitlement
Minister of State for Finance Pankaj Choudhary explained that HRA serves as a compensatory allowance, designed to offset the cost of renting a house when an employee is not provided with official accommodation. The underlying principle is that HRA is meant for those who genuinely incur expenditure on hiring residential accommodation.
According to the clarification, if either spouse, when both are Central government employees posted at the same station, is allotted government accommodation, the family is considered to have been provided housing. Consequently, the other spouse is not deemed to be incurring any expenditure on rent, rendering them ineligible for HRA.
Existing Policy Reinforced, No Review Under Consideration
The ministry emphasized that this clarification reinforces existing policy and does not introduce any new rule. It also stated that no representations have been received from government employees or service associations seeking a review of the current policy, and therefore, no proposal to amend the rule is under consideration.
When Government Employees Can Claim HRA
- If neither spouse has been allotted government accommodation, they may be eligible to receive HRA in accordance with applicable service rules.
- However, if one spouse is allotted official accommodation at the same place of posting, the other spouse cannot claim HRA, irrespective of whether both are Central government employees.
General HRA Tax Exemption Provisions
It is important to distinguish the government's HRA admissibility rules from the general income tax provisions for HRA exemption. Under Section 10(13A) of the Income-tax Act, salaried employees can claim a tax benefit for HRA, provided they opt for the old tax regime and live in a rented house they do not own.
The exempt amount is calculated as the lowest of:
- Actual HRA received;
- Rent paid minus 10% of basic salary; or
- 50% of basic salary for employees living in metro cities (40% for non-metro cities).
To claim this exemption, individuals typically need a rent agreement, rent receipts, and the landlord's PAN if the annual rent exceeds ₹1 lakh. This tax exemption remains available for eligible taxpayers, subject to the conditions of the Income-tax Act, distinct from the government's internal rules on HRA admissibility for its employees.