A Govt. Employee, having basic pay of 45000/- p.m. was receiving HRA of 10000/- p.m. (actual rent paid by him 15000/- p.m.). Then he opted for RFA but is not happy with the accommodation and wants to move to a new rented accommodation and wants to opt for HRA again.
Please suggest if it is advisable for him to do so. And please explain why / why not he should proceed with this….?
P.S. i would appreciate reasons relating to taxability.
You have to compare tax ability under the two alternatives and choose the option with lower tax liability.
1. HRA- Least will be exempted-a. Actual HRA Received b. Rent paid -10% of Salary c. 40% of Salary in case of not metro cities
2. RFA- a.if accommodation owned by govt then taxable value =Licence Fee+10% (if Furnished),
b. if accommodation not owned by govt. then taxable value =rent paid by govt. employer +10% (if furnished)