HRA Calculator

House Rent Allowance (HRA) is a deduction that will help salaried employees to lower taxable income. Employers pay HRA to employees. HRA calculation for the purpose of deduction can be quite complex. Hence one can use an HRA calculator to estimate their deduction amount and plan their taxes well in advance.

hra calculator

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What is House Rent Allowance?

House rent allowance, most commonly known as HRA, is an important component of a salary slip. It is the amount payable by the employer to their employee as part of the salary. In other words, HRA is the amount an employer pays to an employee to meet their accommodation expenses. HRA provides tax benefits to the employees towards the payment of accommodation. The allowance varies on the basis of salary and city of residence.

Section 10(13A) of the Income Tax Act, 1961 regulates the provisions of HRA. The provisions of HRA are beneficial to salaried employees. The major advantage of HRA is that it helps in reducing the total taxable income. Therefore, HRA reductions help in reduction in tax that the taxpayer has to pay.

Salaries of both public and private sector organisations have a HRA component in their salary break up. There are various sections of the Income Tax Act that help salaried, self employed individuals and professionals to make their rent expenditure cheaper.

Self employed individuals can also claim for HRA deductions under Section 80GG.

The amount of HRA is deductible from the total income before determining the taxable income. One can determine the HRA on the basis of their salary. According to the income tax rules, the tax exempt portion of the HRA is the minimum of the following amounts:

  • Actual HRA amount received
  • 50% of the basic salary if the employee resides in metro cities (Delhi, Mumbai, Kolkata, or Chennai) (or) 40% of the basic salary if residing in non metro cities.
  • The actual amount of rent paid minus 10% of the basic salary (basic + DA)

In case the house rent paid by an individual is greater than INR 1,00,000, they can claim the HRA tax exemption towards it. For this, they have to provide the PAN details of the residence owner (property owner) along with rental receipts.

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Rules to claim HRA

Following are the rules applicable to claim HRA:

  • HRA cannot exceed 50% of the basic salary
  • Employees cannot claim their entire rental amount. The exemption amount is the minimum of the following:
    • Actual HRA amount received
    • 50% of the basic salary if the employee resides in metro cities (Delhi, Mumbai, Kolkata, or Chennai) (or) 40% of the basic salary if residing in non metro cities.
    • The actual amount of rent paid minus 10% of the basic salary (basic + DA)
  • Individuals can avail tax benefits of HRA along with their home loan.
  • Annual rent exceeding INR 1,00,000, then submitting landlord’s PAN card is compulsory.
  • In the case of an NRI landlord, the individual has to deduct 30% tax from the rent amount that needs to be declared.

Following are the documents required to claim HRA tax exemptions:

  • Rent Receipts paid by the employee. The receipt should include:
    • Date
    • Name of the landlord
    • Name of the tenant
    • PAN card details of the landlord
    • Address of the accommodation
    • Duration of stay
    • Revenue stamp with the landlord’s signature
    • Photocopy of the rental agreement (if required)
  • For rent paid beyond INR 1,00,000, the employee has to provide the PAN card details can copy of the landlord in order to claim HRA tax exemption.

Also, an employee can pay rent to their father and claim tax exemptions with respect to HRA.

Recommended Tool: Rent Receipt Generator

How is the HRA exemption calculated?

HRA is one of the crucial components of an individual’s salary. It is the total amount employers pay employees towards their accommodation. The amount allotted towards HRA is tax deductible. Hence HRA calculation becomes important.

HRA calculation is based on a number of factors including the city of residence, the rent paid, and actual HRA received. HRA will be the least of the below mentioned amount. This will qualify for a tax deduction.

  • Actual HRA paid by the employer
  • 50% of salary for a metro city, and 40% of salary (Basic + DA) in case of a non-metro city. As per Income Tax provisions, only Delhi, Mumbai, Chennai and Kolkata are considered as metro cities in India.
  • Rent paid in excess of 10% of salary (Basic + DA)

Let’s understand the deduction better with the help of an example.

Ms Divya gets a basic salary of INR 1,00,000 per month. Dearness allowance is INR 90,000, and HRA is 30,000. She pays a monthly rent of INR 25,000 for her house which is in Hyderabad.

Her HRA deduction for the purpose of Income Tax will least of the following:

  1. Actual HRA paid
  2. 40% of salary (Basic + DA), since Hyderabad is a non-metro city
  3. Rent paid in excess of 10% of salary (Basic + DA)

For calculating HRA, the following are required:

  • Salary = Basic + DA = (100000+90000) * 12 = INR 22,80,000
  • HRA paid INR 30,000 per month or INR 3,60,000 per annum
  • Rent paid is INR 25,000 per month or INR 3,00,000 per annum

The least of the following scenarios will be the amount that Ms Divya can claim for deduction:

  1. Actual HRA paid is INR 3,60,000
  2. 40% of INR 22,80,000 is INR 9,12,000, since Hyderabad is a non-metro city
  3. % of salary is INR 2,28,000. Rent paid – 10% salary = INR 3,00,000 – INR2,28,000 = INR 72,000

The least amount is INR 72,000. Hence Ms Divya can claim a tax deduction of INR 72,000.

What is an HRA calculator?

A house rent allowance calculator is a tool that simplifies the calculation of HRA to claim a tax deduction. It does a complex calculation within seconds for salaried individuals. It considers basic salary, dearness allowance, HRA received, rent paid, and the city of residence before calculating the HRA amount. Following are the inputs required by the HRA calculator:

  • Basic salary: It is the basic component of a salary. It is the first line item that appears on the income side of the salary slip. Basic is fully taxable in the hands of employees.
  • Dearness Allowance: It is the amount paid to offset the effect of inflation on one’s pay. DA is the second line item on the income side of the salary slip. DA is fully taxable in the hands of employees.
  • HRA received: It is the amount of HRA one actually receives from the employer. It appears on the income side of the salary slip.
  • Total rent paid: It is the amount of rent that the employee actually pays.
  • City of residence: For HRA calculation, the city of residence becomes important. This is because the HRA calculation will be done based on whether the employee is living in a metro city or a non-metro city. For a metro city, the HRA is 50% of salary (Basic +DA). For a non-metro city, the HRA is 40% of salary (Basic + DA).

Once the taxpayer inputs the above data in the house rent allowance calculator, the output will be the actual HRA amount that he/she can claim as a deduction.

How to use Scripbox’s HRA calculator?

Scripbox’s online HRA calculator makes the HRA calculations easy and effortless. The results from the calculator are quite accurate. Investors can easily calculate the HRA exemption and HRA taxable.

One can follow the steps below to use Scripbox’s HRA calculator.

Enter the following details:

  • Basic Salary
  • HRA received
  • Rent Paid
  • Do you live in a metro city?

Upon clicking calculate, the calculator determines the HRA exemption and HRA taxable.

Let us understand this with an example. Ms Shresta lives in Mumbai, and the basic salary she receives is INR 30,000. The Dearness Allowance is INR 30,000. The HRA received is INR 15,000. The rent that she pays is INR 15,000. Since she lives in a metro city, the HRA amount that is exempt from tax is INR 9,000 and taxable HRA is 6,000.

What are the benefits of using an HRA calculator?

Following are the benefits of using HRA calculator:

  • Ease of use: For calculating HRA, all that one has to do is enter the details. Details such as basic salary, HRA received, rent paid and whether they live in a metro city or no.
  • Accurate results: The computations are accurate and help salaried individuals to determine the amount exempt from tax and HRA taxable amount.
  • Fast computation: The calculator helps in computing the results faster. An individual doesn’t need to worry about doing the complex calculations manually. The calculator saves time and efforts.
  • Better Planning: Computing exemption on HRA and a taxable portion will help an individual plan their income taxes and finances in a better way.
  • Free to use:The calculator is available online and also is free to use. Hence, everyone who is interested in knowing the taxable portion of the HRA and exemption on HRA can use the calculator. Additionally, one can use the calculator multiple times to compare multiple salary scenarios.

What are the components of a salary slip?

Following are the components that form part of the Income side of the salary statement:

  • Basic Salary
  • Dearness Allowance
  • House Rent Allowance
  • Conveyance Allowance
  • Medical Allowance
  • Special Allowance

Following are the components that form part of the Deduction side of the salary statement:

  1. Professional tax
  2. Tax Deducted at Source (TDS)
  3. Employee Provident Fund

What are the documents required for claiming HRA?

To claim HRA, one would need the following documents:

  • Rent agreement
  • Rent receipts
  • PAN card of the landlord, if the rent exceeds INR 1 lakh per annum

Frequently Asked Questions

Can I claim HRA even if I am living in my own house?

No, one cannot claim HRA deduction if they are living in their own house. Nobody pays rent if the property they are residing is of their own and is self-occupied. HRA deduction is only for rent paid.

Can I claim both home loan interest and rent paid?

No, one cannot claim both home loan interest and rent paid (HRA) while filing income tax returns. Since it’s a person’s own house, they cannot claim HRA or rent paid. However, one can claim tax exemption on both the principal and interest that they pay on the home loan.
You can use Scripbox’s home loan EMI Calculator to find your monthly instalments.

Can I claim HRA for two houses?

No, one cannot claim HRA for rent paid for two houses. Let’s take, for example, a person Mr Akhil is residing in a different city from his parents. He is paying rent for himself and his parents as well. But he can claim HRA only on the rented accommodation occupied by him. He cannot claim HRA for the rent paid on the rented accommodation occupied by his parents.

Does the HRA claim include maintenance charges and electricity charges?

HRA is paid only to cover the rent of the house. Maintenance charge or electricity charge will not be included in this.

Can I claim HRA without quoting my landlord’s PAN?

One requires their landlord’s PAN in case the rent paid exceeds INR 1 lakh per annum. In case the landlord doesn’t have a PAN, then the person has to obtain a declaration from their landlord. The declaration should have the name and address of the landlord.

Can I claim HRA while filing ITR?

Yes, one can claim HRA while filing income tax returns (ITR). In case one doesn’t submit the rental agreement and rent receipts to their employer, the TDS deducted will be higher. However, one can claim HRA while filing their income tax returns.