House Rent Allowance HRA Calculator

House Rent Allowance HRA Calculator

House Rent Allowance(HRA) benefits are only available to salaried individuals. Self-employed individuals are exempt from claiming House Rent Allowance(HRA).This exemption is also available only if the employee is living in rented accommodations. In case the employee lives in his/her own house and does not pay any rent, he/she cannot claim House Rent Allowance(HRA).

In case the employee is living in a rented accommodation and the rent paid exceeds Rs.1 lakh in one financial year then the PAN details of the landlord need to be submitted along with the House Rent Allowance(HRA) claims.


House Rent Allowance(HRA) is actually decided based on the salary. There are some other factors that affect it which could include things like the city in which the employee resides. If the place of residence in a metro city then employees are entitled to an House Rent Allowance(HRA) equal to 50% of the salary. For all others cities the entitlement is 40% of the salary.

 

For the purpose of calculating the House Rent Allowance(HRA), the salary is defined as the sum of the basic salary, dearness allowances and any other commissions. If the employee is not receiving a dearness allowance or commissions then the House Rent Allowance(HRA) will be 50% (Or) 40% of the basic salary.

 


The actual House Rent Allowance(HRA) offered will be the lowest of the following three provisions:

 

  • The amount received as the House Rent Allowance(HRA) from the employer.

 

  • Actual rent paid less 10% of the basic salary.

 

  • 50% of the basic salary if staying in a metro city and 40% in a non-metro City.

Example:

Rahul has given following details, Salary - Rs. 30,000 per month (the basic salary will be considered in this case since there is no commission or dearness allowance) House Rent Allowance(HRA) provided by company – Rs. 13,000 per month 10% of basic salary (10% of annual basic salary) – Rs. 36,000

 


  Now  we calculate the three scenarios:

 

  • Amount received as HRA from employer = Rs. 13,000 X 12(months) = Rs.1,56,000

 

  • Actual rent paid less 10% of basic = (Rs. 10,000 X 12) – Rs. 36,000 = Rs.84,000

 

  • 50% of basic salary since he lives in a metro = Rs. 1,80,000


In the case of Rahul, it is evident that the House Rent Allowance(HRA) amount which will be exempt from tax will be Rs. 84,000 because that is the amount that is the least of the three scenarios.


House Rent Allowance(HRA) has no bearing towards your home loan interest deduction. Both can be claimed.


If employer does not give House Rent Allowance(HRA) and one does not have own house and is staying in rented residence then deduction under Section 80 GG can be claimed it is as follows;


The lowest of these will be considered as the deduction under this section

 

  • Rs 2,000 per month

 

  • 25% of total income

 

  • Actual Rent less 10% of Income


The biggest benefit of the house rent allowance is that it provides for an avenue to reduce the taxable income, which in turn leads to a reduction in the tax that you have to pay.


Thank you. Hope you found it useful! If you have questions or need help Write to us professional@filingmantra.com