HRA Calculation: The Easiest Way to Calculate HRA from Basic Salary

House Rent Allowance (HRA) it is a component of a taxpayer’s salary that reduces his/her liabilities , provided he/she stays during a rented accommodation. It is possible to calculate the quantity of HRA which will be exempt from tax using online HRA Exemption Calculators. It can also be calculated manually.

How is HRA Decided?

HRA is mainly determined by your salary. As per the direct tax rules, the tax-exempt as a part of the HRA(House Rent Allowance) is that the minimum of the subsequent amounts:

  1. Actual HRA component of salary
  2. 50% of basic salary if he resides in Delhi, Chennai, Kolkata, or Mumbai; 40% if his residence is in the other city
  3. Actual rent paid less 10% of basic salary

HRA Calculation with Example

Let us consider the scenario of a salaried individual, Mr. Ganesh, who resides in Delhi. He lives during a rented accommodation and pays a monthly rent of Rs.10,000. This amounts to Rs.1.2 lakh annually. The table below shows his monthly earnings:

Basic Salary Rs.30,000
HRA Rs.13,000
Conveyance Rs.2,000
Special Allowance Rs.3,000
Leave Travel Allowance (LTA) Rs.5,000
Total Earnings Rs.53,000

There is a Provident Fund contribution of Rs.2,000 and professional tax of Rs.200 that is deducted from his salary each month.

In Mr. Ganesh’s example, the tax-exempt as a part of his HRA would be rock bottom of the subsequent , considering his earnings on an annual basis:

Actual HRA component of salary: Rs.13,000 * 12 = Rs.1.56 lakh
50% of his basic salary, as he stays in Delhi: 50% * Rs.30,000 * 12 = Rs.1.80 lakh
Actual rent paid minus 10% of basic salary: (Rs.10,000 * 12) – (10% * Rs.30,000 * 12) = Rs.1.2 lakh – Rs.36,000 = Rs.84,000

Since Rs.84,000 is that the lowest value above, this is often the number of tax-exemption Mr. Ganesh can receive on HRA. The rest of the HRA amount received will be taxed as per his income slab.

Documents Required to Claim Tax Exemption on HRA

The taxpayer will need to submit his/her rent receipts so as to avail tax exemption on HRA. In case the individual lives during a rented accommodation and therefore the rent paid exceeds Rs.1 lakh during a fiscal year , then the PAN details of the owner have to be submitted along with the HRA claims. The landlord can provide a self-declaration in case he/she doesn’t have a PAN card.

Q) I even have forgotten to submit rent receipts to my employer. How can I claim HRA tax benefit now?

Ans: During this case, you’ll claim the tax break on HRA at the time of filing tax returns. You will need to keep the proof of rent payment handy, as you’ll be required to submit these documents to the Tax department to authenticate your claim.

Tax Benefits for HRA

  • The actual rent you pay must be less than 10% of your basic pay
  • The actual amount alloted as HRA by your employer
  • 50% of the essential salary just in case you live in a metro, and 40% if you reside elsewhere

FAQs on HRA(House Rent Allowance)

1. Can anyone claim tax exemption on HRA?

Ans: No, not everyone can claim tax exemption on HRA. Although HRA is a component of the salary of most employed individuals, the exemption can only be availed by those people who pay rent. HRA exemption is additionally not applicable for self-employed individuals.

2. Can I claim tax exemption on HRA and deduction on home loan interests at the same time?

Ans: Yes, this is possible. You may be living in a rented house in one city while you own a house (for which you are repaying a home loan) in another city.

  • You can claim tax exemption on HRA (House Rent Allowance) for the rent paid.
  • You can also claim tax write-off on the house loan interest paid.
  • Tax deduction are often claimed on home equity credit principal repayment also.

3. Can I claim HRA tax exemption when paying rent to a family member?

Ans: You can claim tax exemption on HRA if you are paying rent to your parents. However, you should have sufficient documents that function proof of this transaction.

4. HRA is not part of my salary, but I stay in a rented accommodation. Can I get any tax benefits?

Ans: If a person pays rent for an unfurnished/furnished house, he/she can claim tax write-off on the rent paid (under Section 80 (GG) of the tax Act), provided HRA is not part of his/her salary. He/she should furnish Form 10B for this purpose.

5. Can the maintenance charges that I pay for my apartment be included for HRA tax exemption?

Ans: No, HRA exemption can be claimed only for the rent paid. You won’t be ready to claim tax write-off for the upkeep or electricity charges. These charges also are not considered because the landlord’s earnings when calculating his/her tax .

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