Many individuals receive salary benefits from House Rent Allowance (HRA) as a vital element of their compensation package. This benefit enables staff members to handle housing expenses while obtaining tax advantages. The process of understanding how much HRA receives tax exemption remains complicated. An HRA Calculator functions as a tool to make the exemption calculation process easier. The calculator functions to streamline the calculation process for correctly determining house rent allowance exemptions.
The employer makes HRA available to salaried workers, which enables them to pay for their housing expenses. The tax break for House Rent Allowance can be accessed only through the previous tax system. The new tax system does not permit tax exemptions for HRA.
A tenant can receive an HRA exemption to reduce their taxable income through the program. The HRA amounts must be considered taxable income if an individual does not live in a rented house accommodation.
How to Calculate House Rent Allowance Exemption
The HRA exemption amount is determined based on the least of the following three values:
- HRA received from the employer
- Actual rent paid minus 10% of salary
- 50% of the basic salary for metro cities (40% for non-metro cities)
The remaining portion of your HRA is added to your taxable salary. Using an HRA Calculator, you can quickly determine your exemption amount and plan your tax-saving strategy accordingly.
Example Calculation
Let’s consider an example to understand the calculation better.
Scenario:
- Raghu lives in Mumbai (Metro City)
- HRA received from employer: Rs 1,00,000
- Basic salary per month: Rs 50,000
- Monthly rent paid: Rs 15,000
Now, let’s compute the exempted amount:
| Sl. No. | Head | Calculation | Amount |
| 1 | Actual HRA received from an employer | – | Rs 1,00,000 |
| 2 | Actual Rent Paid (-) 10% of salary | (Rs 15,000 * 12) – 10% (Rs 50,000 * 12) | Rs 1,20,000 |
| 3 | 50% of Basic Salary (Metro City) | 50% of (Rs 50,000 * 12) | Rs 3,00,000 |
| – | At least of the above three | – | Rs 1,00,000 |
Hence, Raghu can claim an HRA exemption of Rs 1,00,000, reducing his taxable income.
If you live with your parents in a house they own, you can still claim an HRA exemption by paying them rent. However, there are some conditions:
- Your parents must be the legal owners of the house.
- In their income tax returns, they should declare the rent as income from house property.
- Rent should be paid through a bank transfer or any trackable method to avoid complications.
This method can help optimise your tax benefits while ensuring compliance with tax laws.
What If You Forgot to Submit Rent Receipts to Your Employer?
If you missed submitting rent receipts to your employer, don’t worry. You can still claim HRA exemption when filing your Income Tax Return (ITR). Here’s how:
- Adjust your taxable income by including HRA exemption.
- Recalculate your tax liability based on the reduced taxable income.
- If excess tax has been deducted, you can claim a refund.
What If My Landlord Doesn’t Give Me His PAN?
Rent payments above Rs 1 lakh require you to provide your landlord’s PAN before you can claim an HRA exemption. One cannot find any exception to this mandatory requirement. Claiming HRA exemption becomes impossible when landlords do not give their PAN information.
Can You Claim HRA While Also Claiming Home Loan Deductions?
Yes, you can claim both HRA exemption and home loan deductions simultaneously. Here’s when you can do so:
- If you own a house but live in rented accommodation in a different city for work.
- If you have taken a home loan but currently live in a rented house.
This allows you to avail tax benefits on both HRA and home loan interest (under Section 24b) while optimising your tax savings.
How an HRA Calculator Helps You
An HRA Calculator is a simple tool that helps you calculate house rent allowance exemptions accurately. Here’s how it simplifies your tax calculations:
- Saves Time – No need for manual calculations; just enter your salary details and rent amount.
- Error-Free Calculation – Ensures that you claim the correct exemption amount.
- Tax Planning – This helps you plan your finances better by estimating your tax savings.
- Ease of Use – Works instantly with just a few inputs.
Your salary package contains HRA as a significant taxation benefit, enabling you to lower your taxable income if you reside in a rented accommodation. An HRA Calculator allows you to identify the amount of exemption benefits you can claim quickly. You need to meet every requirement and provide documents correctly along with maximising your tax benefits.
Also Read: How to Claim Tata Car Insurance Online?
