House Rent Allowance (HRA) Calculator

What Is an HRA Calculator?

Your HRA depends on various factors, such as your salary structure, basic salary, dearness allowance, and the city where you live and work. The HRA calculator helps you understand your HRA and the exemption allowed. The taxable HRA amount will be the actual HRA received less the exemption amount.

How Is the Exemption on HRA Calculated?

Rule 2A of the Income Tax Rules lays out guidelines to help you calculate your HRA exemption. As per the rule, you can deduct the lowest amount from the following as your HRA exemption under Section 10(13A) of the Income Tax Act¹:

• The actual HRA received
• 50% of your basic salary (including dearness allowance) if you live in a metro or 40% of your basic salary (including dearness allowance) if you live in a non-metro
• Actual rent paid less 10% of your basic salary (including the dearness allowance)

How Is HRA Taxed?

Let’s see how HRA gets taxed with an example. Say you live in Mumbai and pay a monthly rent of INR 25,000. Your total salary each month amounts to INR 52,000. Annually, you receive an HRA of INR 1,00,000 from your employer. Let’s see how much gets taxed and how much is exempt. The exemption will be the lowest of:

Rule 1:
Actual HRA received = INR 1,00,000

Rule 2:
50% of basic salary = INR 3,12,000

Rule 3:
Actual rent less 10% of salary = INR 2,37,600

Since the lowest amount is the actual HRA received, only INR 1,00,000 gets exempt from taxation under Section 10(13A) of the Income Tax Act.¹ Since you pay over INR 1,00,000 per year in rent, you will have to provide your landlord’s PAN while filing your taxes.

Benefits of Using an HRA Calculator

When you use an HRA calculator, you benefit from:

• Accurate calculations
• Easy tax exemptions based on the calculations
• Quick calculations considering all the variables

How to Use the HRA Calculator

You need to enter the following information to use the HRA calculator:

• Basic salary
• Dearness allowance
• HRA amount received
• Rent paid
• Whether you live in a metro city or not

Once you enter all the details, press the calculate button. The calculator will then tell you how much of your HRA is exempt from taxes and how much is taxable.

How Can an HRA Calculator Help You?
 

The HRA calculator helps you understand what taxes you need to pay on your HRA. Additionally, it provides quick and accurate calculations, allowing you to understand your tax liability within a few minutes. You can even use the HRA calculator to plan your finances for the future based on your HRA allocation and tax exemptions.

Formula to Calculate HRA

Your HRA is allocated by your employer. Your exemption amount depends on your annual income, HRA received, rent paid, and your city of residence. You need to calculate the following three amounts first:

1. The actual HRA received. Let’s assume it is INR 1,00,000 per year.

2. 50% of your salary and dearness allowance. Assume your basic salary per month is INR 45,000 and your dearness allowance per month is INR 7,000. Your monthly total is INR 52,000, which amounts to INR 6,24,000 per year. 50% of the amount totals INR 3,12,000.

3. Actual rent paid – 10% of your annual salary (basic + dearness allowance). Assume you pay INR 20,000 per month as rent. Annually, you pay INR 2,40,000. Less 10% your annual salary = 2,40,000 – (10% of 6,24,000) = 2,40,000 – 62,400  = INR 1,77,600

4. Your HRA exemption is the lowest of the three amounts above, which means your HRA exemption is INR 1,00,000 per year.