HRA Calculator Last Updated : 01 Jun 2020

House Rent Allowance (HRA) is a component of a taxpayer’s salary that reduces his/her tax liability, provided he/she stays in a rented accommodation. It is possible to calculate the amount of HRA that 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 income tax rules, the tax-exempt part of the HRA (House Rent Allowance) is the minimum of the following 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 any 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 in 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 Allowance 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 part of his HRA would be the lowest of the following, 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 the lowest value above, this is the amount of tax-exemption Mr. Ganesh can receive on HRA. The rest of the HRA amount received will be taxed as per his income slab.

Tax Benefits for HRA

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

Documents Required to Claim Tax Exemption on HRA

The taxpayer will have to submit his/her rent receipts in order to avail tax exemption on HRA. In case the individual is living in a rented accommodation and the rent paid exceeds Rs.1 lakh in a financial year, then the PAN details of the landlord need 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 have forgotten to submit rent receipts to my employer. How can I claim HRA tax benefit now?

Ans: In this case, you can claim the tax benefit on HRA at the time of filing income tax returns. You will have to keep the proof of rent payment handy, as you may be required to submit these documents to the Income Tax department to authenticate your claim.

FAQs on HRA (House Rent Allowance)

  1. Can anyone claim tax exemption on HRA?
  2. No, not everyone can claim tax exemption on HRA. Although HRA is part of the salary of most employed individuals, the exemption can only be availed by those who pay rent. HRA exemption is also not applicable for self-employed individuals.

  3. Can I claim tax exemption on HRA and deduction on home loan interests at the same time?
  4. 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 for the rent paid.
    • You can also claim tax deduction on the home loan interest paid.
    • Tax deduction can be claimed on home loan principal repayment as well.
  5. Can I claim HRA tax exemption when paying rent to a family member?
  6. You can claim tax exemption on HRA if you are paying rent to your parents. However, you should have sufficient documents that serve as proof of this transaction.

  7. HRA is not part of my salary, but I stay in a rented accommodation. Can I get any tax benefits?
  8. If an individual pays rent for an unfurnished/furnished house, he/she can claim tax deduction on the rent paid (under Section 80 (GG) of the Income Tax Act), provided HRA is not part of his/her salary. He/she should furnish Form 10B for this purpose.

  9. Can the maintenance charges that I pay for my apartment be included for HRA tax exemption?
  10. No, HRA exemption can be claimed only for the rent paid. You won't be able to claim tax deduction for the maintenance or electricity charges. These charges are also not considered as the landlord's earnings when calculating his/her income tax.

News About How to Calculate HRA from Basic

  • How to claim HRA exemption at the time of filing income tax returns

    House Rent Allowance (HRA) has been a confusing head for most salaried individuals when it comes to claiming exemptions on House Rent Allowance (HRA) while filing Income Tax Returns (ITR). It is important to keep in mind that the tax benefits on HRA are applicable only if an individual is residing in a rented house. The tax benefit is not applicable for individuals who live in their own houses.

    The exempted HRA amount will be reflected in the tax projection statement way before the Form 16 is given out. The employer deducts the HRA from the salary. The deduction can be viewed in Part B of Form 16. The following steps are to be followed to claim House Rent Allowance (HRA) exemption at the time of filing the Income Tax Returns (ITR).

    Declaration of the rental to the employer: This is the best and the most effective way to get exemptions in regards to HRA. Mentioning the amount of exemption in the declaration form provided by the employer to the employee at the beginning of a financial year. The Director of Deloitte Haskins and Sells LLP, Aarti Raote said that it is advisable for the employees to claim HRA through the payroll as it will help avoid the mismatch between the actual tax returns and Form 26AS.

    Claiming at the time of filing yearly tax returns: In case an employee is not able to claim the tax exemptions on the HRA through the employer, he or she can do the same at the time of filing the annual Income Tax Returns (ITR). On this context, Raote said that this can be done by calculating the amount of exemption for HRA and furnishing the same in the designated place provided in the return form under the salary appropriate schedule.

    20 July 2018

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    While addressing the reporters after the end of the Cabinet meeting chaired by Prime Minister Narendra Modi, the Union Minister Ravi Shankar Prasad said that the government wants to increase the investments in higher education. The announcement for the same was made in the last budget and HEFA was established pertaining to that. Prasad further said that the authorised capital has increased from Rs.2,000 crore to Rs.10,000 crore with the view of extending benefits to the central government universities and other new varsities through Higher Education Financing Agency (HEFA). Earlier, these universities did not receive the advantages and thus, this decision was taken at the cabinet meeting.

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    Tukaram Mundhe further explained that every property tax consists of two main components. The first one being the building and the second one being the land - both non-agriculture and agricultural land.

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    This has happened because of the IT Department’s continual efforts in carefully scrutinising non-filers via means such as statutory notices, warnings, emails, and outreach programmes. This statement was made by the Central Board of Direct Taxes or CBDT.

    In the financial year 2018-19, the total number of individuals filing income tax returns has risen to 99.45 lakh.

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  • Collection of Property Tax Gains Momentum

    The financial year is coming to a close and the collection of property has been gaining momentum. Rs.165 crore has been collected so far this year, but the demand is Rs.193 crore. Around 9,000 new assessments have come under the tax ambit over the course of the year. A further 13,000 have changed their tax category from residential to commercial, revealed R.Somannarayana, the Deputy Commissioner (Revenue). Collection of water tax, however, has not been up to par. Only Rs.22 crore has been realised out of the overall demand of Rs.42 crore.

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  • Kerala finance minister highlights disparity in tax allocation

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    There was friction over the division of funds after the Central government recommended to the 15th Finance Commission that the population data for the 2011 Census should be considered for distribution of the central tax revenues, instead of the 1971 Census. Isaac said that this will worsen the Central-State fiscal imbalance. He also mentioned that the use of the population from 2011 instead of 1971 will punish states that followed the national family planning policies to control the growth of the population.

    Andhra Pradesh CM Chandrababu Naidu had earlier made a comment on southern states contributing maximum tax revenue that were getting diverted to the North Indian states for development.

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