House Rent Allowance

House Rent Allowance (HRA) is a vital component of the Income under the head Salary (IHS) provided by the company to the individual for a leased accommodation.

Its chief use is to help employees with tax privileges towards the costs for accommodations each year. HRA falls under Section 10 of the Income Tax Act, 1961, and the exemption can be demanded partially or wholly.

HRA Calculator

The quantity of input used in a HRA calculator depends on exclusion is deducted from the total revenue before coming at a taxable income. It helps an individual to reduce tax. But inputs of the HRA calculator are received from the employer are fully taxable if an employee is living in his own house or does not pay any rent. The HRA calculator can be used as a helping tool for laymen to understand the functioning of the complex taxation system in India.   
An Individual can calculate HRA using the HRA Calculator.

How is the HRA exemption calculated?HRA Calculator

House Rent Allowance should be the lowest out of the 3 provisions:

  • The exact money earned as the HRA from the employer.
  • In case an individual is staying in a metro city, the HRA amount is 50% of the basic salary and 40% if he lives in a non-metro city.
  • Actual rent paid less than 10% of basic salary.

HRA Calculator working with Example

To understand the HRA calculator, let us consider a few examples:

Case 1: Mr Sameer is a salaried individual who resides in New Delhi (a metro city). He is living in a leased property and gives a rent of ₹ 15,000.

Salary component of Sameer includes:

Basis salary* ₹ 45,000
Dearness allowance ₹ 2,500
Commission ₹ 2,500
HRA ₹ 20,000
Conveyance ₹ 2,000
Total ₹ 72,000

Tax-exempt part of Mr. Sameer’s HRA will be the lowest of the following, considering his annual salary:

1. Actual amount received as the HRA 20,000* 12 = 2,40,000
2. 50% of the basic salary* .50*50,000*12 = 3,00,000
3. Actual rent paid less 10% of basic salary 15,000*12 -( .10*50,000*12) = 1,20,000

So, the tax-exempt part of Sameer’s HRA will be the lowest among the three that is ₹ 1,20,000, through Actual rent paid less than 10% of basic salary.

Note:

  • Basic salary includes dearness allowance and commission.
  • Mr Sameer lives in New Delhi, a metro city; therefore, 50% of the basic salary is considered.

Case 2: Mr Kunal is a salaried individual who resides in Bangalore (a metro city). He is living in leased accommodation and gives a rent of ₹ 25,000.

Basis salary* ₹ 45,000
Dearness allowance ₹ 2,500
Commission ₹ 2,500
(HRA) ₹ 20,000
Conveyance ₹ 2,000
Total ₹ 72,000

Mr. Kunal’s tax-exempt part of HRA will be the lowest of the following, considering his annual salary:

1. Actual amount received as the HRA 20,000* 12 = 2,40,000
2. 50% of the basic salary if he lives in metro city .50*50,000*12 = 3,00,000
3. Actual rent paid less 10% of basic salary 30,000*12 -( .10*50,000*12) = 3,00,000

So, the tax-exempt part of Kunal’s HRA will be the lowest among the three, which is ₹ 2,40,000, through the actual amount received as the HRA.

Note:

  • Basic salary includes dearness allowance and commission.
  • Mr Kunal lives in Bangalore, a metro city, so 50% of the basic salary will be considered.

Case 3: Mr Bhuvan is a salaried individual who resides in Odisha (a non-metro city). He is residing in leased accommodation and provides a rent of ₹ 20,000.

Basis salary* ₹ 45,000
Dearness allowance ₹ 2,500
Commission ₹ 2,500
(HRA) ₹ 25,000
Conveyance ₹ 2,000
Total ₹ 77,000

Mr. Bhuvan’s tax-exempt part of HRA will be the lowest of the following, considering his annual salary:

1. Actual amount received as the HRA 25,000* 12 = 3,00,000
2. 40% of the basic salary* .40*50,000*12 = 2,40,000
3. Actual rent paid less 10% of basic salary 30,000*12 -( .10*50,000*12) = 3,00,000

So, the tax-exempt part of Bhuvan’s HRA will be the lowest among the three that is ₹ 2,40,000 through 40% of the basic salary.

Note:

  • Basic salary includes dearness allowance and commission.
  • Mr Bhuvan lives in Odisha, a non-metro city, so 40% of the basic salary will be used in the calculation.

Tax benefits of HRA

  • The tax privilege on HRA lessens the tax burden on people as they are not taxed for arranging a roof on their heads in the region they work.
  • An individual can avail of the tax benefit on HRA even when they avail of home loans on a different home.
  • It takes into record the more costly rent paid due to place of residence.

You can use the HRA Calculator provided on the Dialabank website to compute the HRA depending on your income and place of residence.

FAQs about the HRA Calculator

Are maintenance charges also included in the calculation of HRA tax exemptions?

No, maintenance charges are not included in the calculation of HRA tax exemptions. HRA exemptions can only be claimed for rent paid.

How much of my HRA is exempt from tax?

The lowest of the following will be allowed as a deduction from one’s taxable income-

  • 50% of the basic salary if you live in a metro city
  • 40% of the basic salary if you live in a non-metro city
  • Actual rent paid is less than 10% of the basic salary
  • The actual amount of HRA paid by the employer.

Is Dearness Allowance included when calculating HRA?

Yes, dearness allowance is treated as part of basic salary.

Can I claim HRA tax exemption and rebate on my home loan?

Yes, an individual can claim HRA tax exemptions and rebates on his home loan.

What are the documents required to claim tax exemptions?

An individual will have to submit the rent receipts and the rent agreement benefit from the allowance. If the rent paid by him exceeds ₹ 1,00,000 annual will have to submit the landlord’s PAN Card details along with the rent receipts and rent agreement.

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