HRA Calculator

What is HRA and How to Calculate it? 

The amount employees receive from the employer as a part of the paid salary is called HRA (House Rent Allowance). HRA offers tax benefits to the employees for the amount paid by them for accommodations every year. The employer decides the amount of HRA paid to the employees depending on certain criteria such as the city of residence and the salary. The provisions of the Income Tax Act’s Section 10 (13 A) regulate the house rent allowance.

Only salaried individuals can avail the benefits of house rent allowance. You are exempted from making a claim for HRA if you are a self-employed individual. You can avail this exemption only if you live in a rented accommodation. You cannot claim an HRA if you live in your own house and does not have to pay any rent.

In case you live in a rented accommodation and the rent you pay exceeds Rs. 1 lakh in a fiscal year than the landlord’s PAN details will be required to be submitted with the HRA claims.

How is House Rent Allowance Determined? 

HRA calculation is done based on your salary. There are a few other factors affecting it that include things such as the city where you are residing. If you reside in a metropolitan city then you are entitled to an HRA equivalent to 50 percent of your salary. For all the other cities you are entitled to 40 percent of your salary.

For HRA calculation, the salary you get is defined as the sum of dearness allowances, basic salary and other commissions. If you do not get commissions or dearness allowance then the house rent allowance will be 40 percent or 50 percent of your basic salary.

The concrete HRA provided will be the most minuscule of the three provisions below:

The sum you receive as the house rent allowance from your employer.

Actual rent you pay minus 10 percent of your basic salary.

50 percent of your base salary if you stay in a metro city and 40 percent in a non-metro city.

HRA Calculator

A few of your salary’s components can be exempted from tax without the requirement to invest in any of the instruments of tax-savings. One of these components is house rent allowance. To compute the amount of the HRA that you can exempt from tax, you can make use of HRA calculator.

HRA Calculator is an online tool designed to assist you to compute your House Rent Allowance.

HRA Calculation

The HRA, i.e. House Rent Allowance is a significant component of your salary that describes the total amount received from the employer towards your accommodation as rent. The HRA calculation with hra calculator can be useful for you as it is computed for deductions of taxes for a certain fiscal year. The HRA assists you to reduce your taxable income for which you are accountable to be paid. The tax benefits from HRA can be availed by only those employees who stay in rented accommodation. If you stay in your own house, you will not qualify to claim the tax deductions.

If you are looking for ways on how to calculate HRA, you need to understand first of all that HRA is a vast topic that covers several factors like the right to 50 percent of the basic salary if you stay in a metropolitan city and 40 percent for those who reside in other cities.

The computation of HRA for benefits of tax is measured from any one of the provisions below:

The exact sum your employer allots as the House Rent Allowance

Actual rent you pay less than 10 percent of your basic salary

50 percent of your base salary, if you stay in metro city while 40 percent for other cities.

The lowest of the above-mentioned figure will be taken into consideration for deduction of tax from HRA.

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How to Calculate HRA? 

We are providing you with an example to make you understand how you can calculate HRA. There is a payslip below belonging to Siddhartha who stays in Bangalore in a rented house with a rent amount of Rs. 10,000 per month.

An example of Payslip:

To compute Siddhartha’s HRA, which is exempted from his Income Tax we have:

Salary= Rs. 30,000 per month (the basic salary is taken into consideration in this case since no dearness allowance or commission is there).

The company provides HRA of Rs. 13, 000 per month that is the 10 percent of basic salary (10 percent of the annual basic salary) = Rs. 36,000.

Now let us compute the three scenarios:

The amount that the employer gives as HRA = Rs. 13, 000 x 12 months = Rs. 1, 56,000

Actual rent that is paid less 100% of the basic salary = (Rs. 10,000 x 12 months)-Rs. 36,000 = Rs. 84,000

50 percent of the basic salary since Siddhartha lived in a metro = Rs. 1, 80,000

Siddhartha’s case gives you an idea about how to calculate HRA that will be exempted from his tax. The amount is going to be Rs. 84,000 as for this the lowest of all the three scenarios.

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Rules for HRA Calculation and Claims:

The rules mentioned below are appropriate for HRA claims:

The house rent allowance cannot go beyond 50 percent of the basic salary

The full rental amount that you pay cannot be claimed by you. The exemption will depend on the lowest of the following options:

The exact amount that the employer allots as the HRA

Actual rent that you pay less 10 percent of your basic salary

50 percent of your basic salary, if you reside in a metro city and 40 percent if you live in non-metro city.

You can avail HRA tax benefits together with a home loan.

If you stay with your parents, you can make of rent to your parents and get a receipt for a claim of HRA. However, as per the rules, you cannot claim HRA if you pay rent to your spouse.

It is mandatory to present the PAN card of your landlord if your rent exceeds Rs. 1,00,000 per year. The landlord will have the option of self-declaration if he does not have a PAN card.

In the case of NRI landlord, you must subtract 30 percent tax from the amount of rent that is required to be declared.

HRA Calculator – FAQs

Q1. What is HRA Calculator?

HRA Calculator is an online tool to help the individuals calculate their House Rent Allowance (HRA). Here, HRA is the total amount that is allotted by their employers towards their respective house rents.

It is beneficial for the employees as it helps them reduce their taxable income. However, it should be understood that HRA tax benefits are applicable for only those employees who reside is a rental property.

Q2. How HRA is calculated for tax saving?

The HRA calculation is based on different factors like if an employee is staying in a metro city 50% of her/his basic salary will be entitled to the HRA. In case s/he is living in a non-metro city 40% her/his basic salary will be entitled to the HRA. The HRA calculation for tax benefit depends upon either of the below-enlisted provisions:

• The actual rent paid by the employee subtracted from 10% of her/his basic salary.
• The House Rent Allowance (HRA) amount allotted by the employer
• 50% of the employee’s basic salary, if s/he is staying in a metro city (40% for non-metro cities)

The minimum amount from the aforementioned provisions will be considered for tax deduction from HRA.

Q3. What are the proofs that are to be submitted for claiming HRA?

Earlier, employees used to submit rent receipts to receiving tax exemption for their HRA. The rent receipt used to help them with a minimum of 60% tax rebate on the HRA. However recently, the Income Tax Appellate Tribunal (ITAT) has introduced a new rule wherein the assessing officer can question the validation of the claim if required.

The assessing officer has a right to demand proof to accompany the rent receipts submitted by the taxpayers. Below is the list of documents that can be used as a proof to claim HRA:

• Electricity bill
• Water bill
• Letter informing about the tenancy to the housing co-operative society
• Rent Agreement (Lease & license agreement)

It should be noted that the rent agreement should be of the current financial year and should be duly stamped on a notarized stamp paper. It should contain details such as the name of the employee (renter), rent amount s/he is paying, her/his landlord’s signature and the full address of the residence. The employee may also need to submit the landlord’s PAN card her/his annual rent is more than INR 1 lakh.

Q4. Can you avail HRA tax benefit if you are living with your parents?

Yes, you can avail HRA tax benefit if you are living with your parents. It should be known that since rent is meant to be paid to the owners, your parents should own the property. Also, you cannot be either owner or co-owner of the particular property.

You can enter into a rent agreement with your parents and can pay the rent directly to your parents’ bank account either using net banking service or cheques. Paying directly to your parents’ bank account will help you support your HRA claim later on.

Q5. Can I claim HRA tax benefit if I am living in my own property?

No, there is no HRA tax benefit if are residing in your own property as HRA deduction is only applicable for the rent paid to others.

Q6. Can I claim HRA tax benefit even if my landlord refuses to give his PAN details?

Yes, you can claim HRA even if your landlord refuses to share his PAN details. However, you will need to keep a record of your rent agreement, rent receipts, lease deed, intimation letter sent to the society stating the occupancy of the property to substantiate your claim.

As per experts, it would also do good to you to pay your rents through different banking channels rather than dealing in cash. Cash dealings may not be considered genuine in certain cases.

Q7. Can you claim both HRA and home loan tax exemption?

There are scenarios where the individuals may have been working in one city and residing in a rented accommodation but their family live in another city and they buy a property where their family is.

Yes, homeowners having a home loan and who are also getting HRA as part of their salaries can claim both HRA as well as home loan tax exemption.

As a homeowner, you can claim:

• As per section 24, a deduction on home loan interest
• HRA tax exemption towards rent payment
• Principal repayment under Section 80C

Q8. Do both the spouses can claim HRA tax benefit individually?

In case, both of the spouses are paying rent to the homeowner and are getting separate receipts from the landlord; they both can claim HRA deduction separately. However, they need to be careful to avoid any duplication to ensure that the income-tax department hasn’t deducted tax twice from their landlord's income.

Q9. How to show HRA not accounted by the employer in ITR?

In case your employer misses to count your HRA in the Form 16, you can still claim it at the time of ITR filing and can get the refund of such excess tax deducted.

Q10. How can self-employed individuals claim tax benefit on their rent payment?

Yes, self-employed individuals can also claim tax benefit on their rent under Section 80GG of the Income Tax Act. The tax exemption allowed under this section is the least of either of two:

• Rs 60,000 per annum or Rs. 5000 per month
• 10% of the total income subtracted from the total rent paid
• 25% of the adjusted total income of the self-employed individuals
  They also need to file Form 10BA which should have the details of your payment.

Q11. What if I pay rent but do not receive HRA?

You can still claim tax exemption on your paid rent under section 80GG even if you do not receive HRA. However, there are certain conditions that need to be fulfilled –

• You should have a regular source of income (self-employment or salary).
• You haven’t received HRA at any point in time during the particular year for which you’re claiming 80GG
• You/ your spouse/ your minor child should not own any residential property at the place where you currently live. HUF of which you are a member also comes under this category. You should also not perform any business, office duty or employment t that particular place.
• If you have any residential property under your name for which your Income from house Property is calculated, there won’t be any deduction under section 80GG.

In addition to the aforementioned pointers, you will also need to file Form 10BA with details of payment of rent.

Helpful Resources: How To Calculate Income Tax