
HRA Exemption Calculator
- What is HRA?
- Eligibility for HRA?
- Why is HRA important in case of salaried employees?
- What is the HRA Exemption Limit?
- Actual HRA received
- 50% of [basic salary + DA] for those living in Delhi, Kolkata, Mumbai or Chennai, OR 40% of [basic salary + DA] for those living in any other cities.
- Actual rent paid (-) 10% of [basic salary + DA]
- Components of HRA Calculations
- Documents Required for HRA claims
- Rent Receipts or rental agreement
- PAN of the landlord if rent payment is more than Rs. 1 Lac annually.
- Relevant Income Tax Sections and Rules for HRA under Income Tax.
- HRA V/s Home Loan
- The HRA Exemption is managed integrating constantly with other exemptions and is provided under Section 10 (13A) of The Income Tax Act, 1961.
- Under some situations (if the actual HRA received is lower of all other factors in the exemption formula), it is also possible to take 100% deduction from House Rent Allowance (HRA).
- If the home loan amount is smaller or does not provide maximum deductions then claiming HRA will be more beneficial.
- For instance, if your home tax has a large amount of investments that would be tax-deductible under section 80C, you may be able to claim HRA in which case you would be able to utilize that limit in the deduction for other investments.
- Claiming for the deduction of Repayment of Principal:- Section 80C allows a taxpayer to deduct up to Rs 1.5 Lakhs for the repayment of the principal portion of the home loan in a year.
- Interest Payment Deduction: You can also claim deduction for interest payments of up to Rs. 2 lakhs per year on your home loan under Section 24.
- The benefits of getting a Home Loan include not only the tax benefits for that year but also the long-term increase in wealth that comes with buying a home.
- If you are a very high earner, then using the most available deductions related to home loans can greatly lower your tax obligations. However, HRA may not yield as much in savings.
House rent allowance (HRA) is an allowance given by an employer to an employee to cover the cost of rented housing. It is a part of salary structure offered by an employer to employee.
To be eligible for the tax benefit on HRA, you need to be a salaried individual, have the HRA component in your salary structure, and stay in a rented accommodation.
HRA is a tool to reduce tax liability of salaried employees. Hence, it is important to divide total monthly salary into different components which are tax friendly.
A portion of HRA is excluded from taxation under Section 10 (13A) of the Income Tax Act of 1961.
Least of the following amounts can be claimed as HRA exemption:
Component | Description | Consideration for HRA Exemption |
Basic Salary | The fixed component of the employee's salary, excluding allowances, bonuses and incentives. | Used to calculate 40%/50% of salary for HRA exemption. |
Dearness Allowance (DA) | A part of salary to offset inflation, included if considered for retirement benefits. | Included in "salary" for HRA exemption if part of retirement benefit structure. |
House Rent Allowance (HRA) | The specific allowance provided by the employer for rental expenses. | Actual HRA received is considered for exemption calculation. |
Metro/Non- Metro City | Location of residence (metro cities: Delhi, Mumbai, Kolkata, Chennai). | 50% of salary for metro cities; 40% for non-metro cities. |
PAN of Landlord | PAN details of the landlord (mandatory if rent exceeds ₹1,00,000 annually). | Required for claiming HRA exemption. |
Section/Rule | Description | Applicability |
Section 10(13A) | Exempts a portion of HRA from taxable income if conditions are met. | Applicable to salaried individuals receiving HRA as part of their salary. |
Rule 2A | Specifies the method for calculating the exempt portion of HRA. | Depends on factors such as salary, HRA received, rent paid, and location. |
Section 17(1) | Defines "salary" for HRA exemption calculations, including basic salary, DA (if applicable), etc. | Relevant for determining eligible components of salary. |
Section 192 | Employer's responsibility to deduct TDS after considering HRA exemption. | Applicable for employers processing employee salary. |
Section 139(1) | Filing of Income Tax Return (ITR) including HRA details. | Mandatory for individuals with taxable income after HRA calculation. |
Section 80GG | Deduction for rent paid by individuals not receiving HRA. | Applicable to self-employed or salaried individuals without HRA benefits. |
HRA
Home Loan
FAQs
Tips about HRA Calculations
Basic Salary
Basic Salary The fixed component of the employee's salary, excluding allowances, bonuses, and incentives. Used to calculate 40%/50% of salary for HRA exemption.
Dearness Allowance (DA)
A part of salary to offset inflation, included if considered for retirement benefits
HRA received
The specific allowance provided by the employer for rental expenses.
Total Rent Paid (Annually)
The total rent paid by the employee to the landlord.