House Rent Allowance (HRA) Calculator
The monthly income you earn has various allocations, such as your travel allowance, provident fund contribution and more. Your House Rent Allowance (HRA) is one such allocation. Your employer offers this allowance for the money you pay as rent each month. There are certain tax exemptions available on your HRA under Section 10(13A) and Rule 2A of the Income Tax Act of 1961.1 It’s crucial to note that the exemption is only offered if you live in rented accommodation. Let’s learn more about the HRA and how you can calculate your exemption.
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:
Actual HRA received = INR 1,00,000
50% of basic salary = INR 3,12,000
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.
No, you can only get a tax rebate on HRA if you reside in rented accommodation.
Yes, if you’re repaying a home loan while living in rented accommodation, you can get both the HRA tax exemption and a tax rebate on your home loan. However, you may have to show that the home you own is very far away from your place of work.
Unfortunately, you need your landlord’s PAN to avail any HRA tax exemption over INR 1,00,000 per year.
Yes, you can. The exemption is only available if your parents own the house and they declare the rental income provided by you in their income tax returns.
1 The above stated tax benefits are subject to the provisions & conditions mentioned in the existing Income Tax Act, 1961. Tax Laws are also subject to change from time to time.
It is requested to seek tax advice of your Chartered Accountant or personal tax advisor with respect to your personal tax liabilities under the Income-tax law.
ARN - ED/12/22/30774