HRA Calculator

What is HRA?

The salary generally constitutes basic pay, allowances for travel, accommodation & health as well as a forced saving in the form of gratuity or PF. House Rent Allowance (HRA) is that part of the salary that is provided by the employer for the expense towards accommodation rentals. It reduces the tax amount owed to the Government of India, as per Section 10 (13A) with Rule 2A of the Income Tax Act, 1961. It can be claimed only in the event that the employee or taxpayer lives in a rented accommodation.

How is HRA calculated?

Every public and private sector employee’s salary is broken down and detailed into various allowance, forced savings and the basic salary. The HRA is a part of this structure. Whether the employer has provided a separate amount for HRA or not, the HRA exemption can be calculated, so one can apply for the exemption during filing of ITR. To calculate HRA, as per the Income Tax Act, it is the lowest amount of all the following.

1. The amount of HRA mentioned in the salary break up
2. 50% of the salary, if the employee is based in an Indian metro city
3. 40% of the salary, if the employee is based in an Indian non-metro city
4. Actual rent – 10% of salary (basic salary + commissions + dearness allowance)

What is the HRA calculation formula?

HRA calculation can be done by simply using the Upstox HRA calculator for Income Tax. The HRA Exemption is calculated to be the lowest of the following four values:

1. The amount of HRA mentioned in the salary break up
2. 50% of the salary, if the employee is based in an Indian metro city
3. 40% of the salary, if the employee is based in an Indian non-metro city
4. Actual rent – 10% of salary (basic salary + commissions + dearness allowance)

Let’s say the Basic Salary of an employee is Rs. 5,00,000 p.a. & HRA provided by employer is Rs. 1,50,000. He pays rent of Rs. 2,50,000. Also let us assume that the employee is working out of New Delhi.

1. HRA is Rs. 1,50,000
2. 50% of Salary is Rs. 2,50,000
3. Actual rent (2,50,000) – 10% of salary (50,000) is Rs. 2,00,000

Hence, in the above mentioned scenario, the HRA Exemption, being the lowest of the three amounts is Rs. 1,50,000.

How to Claim HRA Benefit?

During filing Income Tax Returns, HRA Exemption can be claimed by providing yours and landlord’s PAN card copy, rent payment receipts and rental agreement/s. These documents must be submitted & the employee may deduct from his Income Tax the lowest of the following amounts, as per the Income Tax Act, 1961. HRA Exemption is the lowest value amongst:

1. The amount of HRA mentioned in the salary break up
2. 50% of the salary, if the employee is based in an Indian metro city
3. 40% of the salary, if the employee is based in an Indian non-metro city
4. Actual rent – 10% of salary (basic salary + commissions + dearness allowance)

What is HRA Exemption?

HRA Exemption is a tax benefit that can be claimed by any employee of both the private & public sector as long as they live in a rented property where they pay rent to the homeowner. Every employee is eligible to benefit from HRA Exemption as per their salary breakup. The lowest amount between your Housing Rental Allowance provided by the employer, 10% less than your basic salary, 50% for metro city dwellers and 40% for non-metro dwellers is the HRA exemption you can claim during filing of your ITR. You can claim this even if your employer does not provide HRA. In the case both you and your spouse or other family members share rental accommodation, either all parties must have separate rent payment receipts or only one person can claim HRA.

Documents Required to Claim the HRA Exemption?

The documents required for claiming HRA Exemption are:

1. If your rent increases over Rs. 1,00,000 in one financial year, you will have to provide both yours and your landlord’s PAN card copy.
2. The rental receipts which should have the date, landlord’s name, your name, landlord’s PAN details, rented accommodation address, duration of stay & a revenue stamp and signature of the landlord. For a year, atleast 4 receipts are required as the same one can be used for 3 months.
3. Rental agreement.

What are the conditions for claiming HRA Exemption?

The conditions for claiming HRA Exemption are:

1. As per Section 80, the exemption can only be claimed when you have a rental agreement and are paying rent to a house owner.
2. In the periods that rent is not paid, the HRA is not deductible.
3. If you change jobs, the HRA is calculated monthly. The same is true if you move from a metro city to a non-metro city or vice versa.
4. Rent paid to any member of the family other than your father can be claimed under HRA. But, to claim this HRA, there must be regular monthly payments of the rent through bank transfers.

What are the eligibility factors to avail HRA Exemptions?

To be eligible to avail HRA Exemption, you must be:

1. An employee in the private or public sector
2. Live in a rented accommodation close to your place of work
3. Paying rent to a house owner, with proof of an agreement & receipts.

What are the benefits of the HRA Exemption calculator with Upstox?

The Upstox HRA Exemption calculator is an easy to use calculator that provides accurate answers instantaneously and cancels out human error. To quickly calculate your Housing Rental Allowance Exemption for Income Tax benefits, use this calculator. It is easy to understand and takes into account all parameters of HRA calculation, hence, providing the quickest accurate result.

HRA calculation examples:

Let’s say the Basic Salary of an employee is Rs. 7,00,000 p.a. & HRA provided by employer is Rs. 4,50,000. He pays rent of Rs. 3,50,000. Also let us assume that the employee is working out of Mumbai.

1. HRA is Rs. 4,50,000
2. 50% of Salary is Rs. 3,50,000
3. Actual rent (3,50,000) – 10% of salary (70,000) is Rs. 2,80,000

Hence, in the above mentioned scenario, the HRA Exemption, being the lowest of the three amounts is Rs. 2,80,000.

In the same example, what if the employee was living in the small town of Shimla?

4. HRA is Rs. 4,50,000
5. 40% of Salary is Rs. 3,15,000
6. Actual rent (3,50,000) – 10% of salary (70,000) is Rs. 2,80,000

Hence, in the above mentioned scenario, the HRA Exemption, being the lowest of the three amounts is Rs. 2,80,000.