HRA Exemption Calculator

Under the Income Tax Act, 1961 a salaried individual can enjoy several tax benefits on their total income generated each year that helps in reducing their overall liabilities by quite a substantial amount.

Under such benefits, one should take note of the tax benefits that can be enjoyed on the house rent allowance portion of one’s income.

What is HRA?

HRA or House Rent Allowance is an amount that employers pay to employees, as a component of their total monthly earnings.

If you reside in a rented house, HRA will offer you the benefit by way of exemption of yearly rent from taxation at the end of a financial year.

The exact amount you are eligible to receive as HRA depends on a number of factors, including your salary, location of residence and more.

What is HRA Calculator?

A house rent allowance calculator is an online financial tool that helps in computing the amount that an individual can enjoy as tax benefit each year on his/her house rent allowance as per the Income Tax Act, 1961. This online calculator aids in simplifying the otherwise cumbersome task of computing tax benefits.

HRA Exemption Calculation Formula

HRA exemption is calculated as per Income Tax Rule 2A. According to this, the least amount of the following is exempted from an employee’s salary under Section 10(13A) and is a non-taxable portion of their income –

Actual HRA that employees receive from their employer.
For metro city employees, HRA is 50% of the sum of basic salary and DA. For non-metro city employees, it is 40% of the sum of their basic salary and DA.
Actual rent applicable minus 10% of (Basic salary + DA).

Keep in mind that only the least amount from these provisions is applicable for your HRA exemption.

Let us take an example to understand the exact process of HRA calculation

Suppose Avinash resides in Mumbai, where his monthly rent is Rs.30,000. His HRA each month amounts to Rs.18,000 while the basic pay component of his salary stands at Rs.42,000 per month.

Now, we can calculate the various HRA provisions in his case.

Actual HRA received = Rs.(18000 x 12) = Rs.216000
Actual rent applicable minus 10% of basic salary = Rs.(25800 x 12) = Rs.309600
50% of basic salary (as Avinash stays in a metro city) = Rs.(21000 x 12) = Rs.252000

Since the least of these sums is considered HRA, we can say that Avinash has to pay Rs.18000 as HRA each month.

For a whole year, HRA exemption for him would be Rs.18000 x 12 or Rs.2.16 lakh. This amount would be deducted from his total taxable income at the end of a financial year.

However, instead of undertaking the cumbersome process to determine HRA manually, you can always choose to use an HRA exemption calculator, available online. Such tools make life easier, ensuring accurate results every time.

How to use HRA Calculator online?

Manually determining your HRA deduction can be problematic and time-consuming. Thankfully, finding a quality HRA exemption calculator is relatively simple.

Once you find such a tool, simply follow the steps mentioned below to determine your yearly HRA benefits.

Step 1: Open the calculator page.
Step 2: Fill in the appropriate fields with your basic salary amount, dearness allowance earnings, HRA amount and your total rent.
Step 3: Next, choose whether you reside in a metropolitan city or a non-metro city.
Step 4: Verify all of the data that you entered once again to prevent any errors.
Step 5: Click on “calculate”.

Following these five steps should show you exactly how much tax exemption you can expect while filing your tax returns at the end of a financial year.

Keep in mind that, in some cases, an HRA calculator will come with sliders instead of fields. Nevertheless, the functionality remains the same.

Benefits of using an HRA Exemption Calculator

If you are wondering, whether you are better off avoiding such online calculators, following are some benefits of using these tools that you should consider:

These calculators ensure swift calculations of your HRA claims. Manual calculations tend to be much slower.
Calculators never make mistakes when displaying results. The same cannot be said for manual calculations, where unforeseen errors are always a possibility.
An HRA calculator considers all of the variables that go into calculating HRA benefits, starting from your basic salary to the city you reside in.

Concisely, such a calculator simplifies the task of determining your HRA exemptions for a particular year, based on income and other factors. You can even calculate the same while filing your year-end taxes.

Eligibility Factors to avail HRA Exemptions

Not every salaried employee can claim these benefits while filing taxes, because one needs to meet specific criteria to take advantage of the same. Here are some factors that decide your eligibility for HRA exemptions:

You must be a salaried employee.
Your employer must include an HRA component in your monthly payments.
You have to pay rent to qualify for House Rent Allowance tax benefits.
You should not own any residential property.
You should not receive rent from any property that you may own.

As you can understand from the requirements listed above, self-employed individuals cannot claim this tax benefit.

Homeowners can avail HRA exemptions, along with the applicable tax benefits on home loan interest and principal payments under two conditions.

You qualify for HRA if your owned property is rented out, but you do not receive the said rent (a family member may receive the rent on your behalf).

Alternatively, you can be a property owner and still claim HRA benefits if you reside in a different city than where your owned property is located.

Things to keep in mind when calculating House Rent Allowance Exemption

When calculating HRA deductions, you must keep the following guidelines in mind:

Allocated HRA cannot exceed 50% of your basic salary.
Salaried employees cannot claim for deduction of the full rental amount. Instead, the least amount from the three provisions will be deemed as a suitable exemption.
Tax benefits of HRA are available alongside home loan tax rebates.
If annual rent is higher than Rs.1 lakh, your landlord’s PAN card must be presented to claim HRA benefits.
If you live with your parents, you can pay rent to them and collect HRA receipt for the transaction. However, you cannot claim HRA benefits by paying rent to your spouse or partner.
If your landlord is NRI, you will need to deduct 30% tax from the rent amount before presenting it for HRA deductions.

If these calculations prove too tricky for you, you can always use an HRA calculator to determine your yearly income tax savings under this provision.

FAQs related to HRA Exemption Calculator

✓ What documents do I need to submit to prove payment of rent?

As a rent payer, you need to submit the receipts of your payment for the last year. If you do not have these receipts, you can also prove rent payments through your bank account statement.

✓ Can I claim HRA benefits of multiple properties?

Even though you can rent more than one property if you wish, HRA benefits will still be available on only one of the properties. Therefore, increasing the number of rented properties does not translate into more tax savings.

✓ Do I need additional documents to claim HRA if monthly rent exceeds Rs. 8334 (1 Lac per annum)?

In the event that you pay more than Rs. 8334 as monthly rent (or more than 1 Lac per annum), you would need to furnish your landlord’s PAN card details, along with the rent receipts, to avail HRA exemptions. If your property owner cannot provide a PAN card, you need to furnish a written consent from him/her stating the same.

✓ When can I claim HRA without rent receipts?

You can only claim HRA without rent receipts if your house’s monthly rent is lesser than or equal to Rs.3000. For higher rents, furnishing receipts is mandatory if you are looking to reduce tax burden using HRA.

✓ Do HRA exemptions include maintenance charges on a rented property?

Maintenance charges do not count as your property owner’s earnings. Therefore, you cannot claim tax benefits on such expenses. The same is true for electricity expenses that you incur while living on rent.

✓ Why do HRA calculators take into account whether I live in a metro or non-metro city?

House rent allowance exemptions are calculated using three provisions, and the least amount from the three is considered the tax benefit you can claim as part of HRA.

One of these provisions considers HRA as a specific percentage of your basic salary plus DA. For metro city residents, this percentage is 50%.

For non-metro residents, it is 40%. This is why HRA calculators need to know whether you live in metro or non-metro locations.

✓ Can I avail HRA when staying in parent’s house?

You can avail HRA exemptions even when residing with your parents in their property. However, to qualify for this rebate, you would need to pay monthly rent to them. While filing your taxes at the end of the year, you would also need to furnish the rent receipts as one normally would.

✓ When can I avail HRA exemptions simultaneously with home loan tax benefits?

If you purchase a property but do not reside there because of some reason or the other, you can avail tax benefits on your rent, as well as, home loan interest and principal payments in a given financial year.

✓ Can I claim HRA exemptions even if my employer does not include housing rent allowance in my salary?

If you stay in a rented property, you can still claim tax deductions on your rent, but under Section 80GG, instead of Section 10(13A). You also need to fulfil certain conditions to avail exemptions through this section.

✓ What are the conditions to avail tax exemptions on rent under Section 80GG?

To avail claims under this section of the ITA, you need to be a self-employed or salaried individual. Also, you should not have received HRA from your employer at any time in the year for which you are claiming tax benefits. Lastly, you or your immediate family members must not own a property in your current city of residence.