Know HRA Exemption Calculation Formula here. Calculate your HRA exemption (House Rent Allowance Exemption) Online. You can also download HRA Calculator for easy calculation of exempt HRA Allowance out of Total HRA received by Salaried Individual. The salaried assessee and a Resident of India can check the HRA Calculation and the HRA exemptions here which are explained in detail. First of all, before looking about the calculation let us take a look at what is HRA and to how HRA is exempted to tax.
What is HRA?
A Salaried assessee who lives in a rented house can claim HRA or House Rent Allowance to lower taxes. House Rent Allowance or HRA is an allowance given with the salary. The HRA is an amount given by the employer to his employees as a part of Salary to meet the expenses in connection with rent of the accommodation. HRA can be completely or partially exempt from taxes. The allowance is for expenses related to rented accommodation. If you don’t live in rented accommodation, this allowance is fully taxable.
House Rent Allowance is a benefit provided by the employer to his employee for his residential purpose. This HRA benefit is taxable under head ‘Income from Salaries’. House Rent Allowance is regulated by the provisions of Section 10(13A) of the Income Tax Act. HRA allowance benefit is available only to the salaried individuals but no to the self-employed individuals. If the employee is living in rented accommodations, then this exemption is available. House Rent Allowance cannot be claimed if the employee lives in his/ her house. PAN Card details of the landlord must be submitted along with the HRA claims if the rent of the employee exceeds Rs. 1,00,000/-. HRA Calculation is given here on our site. The Assessee can get an example in which the calculation and exemptions are given below. By using this HRA exemption calculator you can get the HRA allowance easily.
Who gets House Rent Allowance?
- Only salaried Individuals gets the benefits of House Rent Allowance.
- Self-employed individuals are exempt from claiming HRA Exemption.
- The Private or Government Salaried assessees who get accommodation, do not get the HRA allowance.
- HRA exemption is also available only if the Salaried employee is living in rented accommodations rather than an own house.
- Most of the employers include House Rent Allowance in the salary package. The HRA (House Rent Allowance) is beneficial to both the employer and the employee.
What are the Benefits of HRA?
The most important benefit of House Rent Allowance is the tax exemption. The inclusion of House Rent Allowance (HRA) in your salary saves a huge portion of the tax. For most of the employee, this allowance is one of the best tax saving method. The House Rent Allowance is also beneficial to your employer. Your employers do not give money for your HRA allowance from their pocket. Rather, organization take out some part of your basic salary and allot it to you as the HRA. So there is no extra expenditure to the employers.
On the other hand, the allotment of HRA reduces the basic pay of the employee. So the employers pay less basic pay to the employee. The Employer pays 12% of the basic pay as the EPF contribution. Along with this, low basic pay also reduces the gratuity of the employee. The calculation of gratuity is also based on the basic pay. With help of HRA Calculator, you can easily get house rent exemption calculation without any paper hassles.
Read More: Online HRA Calculator
A Salaried Individual can claim HRA exemption u/s 10 of Income Tax Act if he/she stays in a rented house and is in receipt of HRA allowance from his employer. In order to claim the HRA exemption, a salaried assessee must actually pay rent for the house which he occupies. The rented premises must not be owned by the employee. In case the employee stays in own house, nothing is deductible, and the entire amount of House Rent allowance received is subject to tax. As long as the salaried assessee does not own the rented house, This minimum of following is allowed as income tax exemption on HRA. In short, the HRA Exemption under Section 10 (13A) of the Income Tax shall be the least as follows.
- Actual HRA received from your employer/Organization.
- Actual house rent paid by the salaried assessee minus 10% of basic salary.
- 50% of basic salary along with dearness allowance if you live in a metro or 40% of the basic those living in metro cities for non-metros.
Salary for calculation the HRA exemption
Salary = Basic Salary + Dearness Allowance(DA) + Commission based on fixed percentage of turnover).
These are following factors to which HRA Exemption under Section 10.
- Place of Residence.
- Rent Paid.
- HRA Received.
How to Calculate HRA from Basic Salary?
Here you can check HRA exemption calculation and House Rent Allowance exemptions of income tax from Ho Joon Jae’s Salary.
- Since there is no Commission or Dearness Allowance (DA), the basic salary is fully considered as Rs. 30,000/-.
- HRA provided by the Company is Rs. 13,000/- per month is 10% of basic salary.
- 10% of Annual Basic Salary is Rs. 36,000/-.
House Rent Exemption Calculation by the 3 Scenarios is as follows:
- The Amount received as House Rent Allowance from employer = Rs. 13,000/- x 12 (months) = Rs. 1,56,000/-
- Actual rent paid less is then 10% of basic salary = (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/-.
As considering the least from the 3 Scenarios, the House Rent Allowance amount which will be exempt from tax will be Rs. 84,000/-.
In the above section, we have seen clearly about HRA exemption calculation. Now let us take an example for calculating HRA Allowance from the Basic. Let us take the pay slip of ‘Mr. Ho Jun Jae’. He is staying in Karnataka and paying his House Rent Allowance of Rs. 10,000/- per month. Let us have a look at the Calculation of HRA Tax Exemption for the following case.
|Employee No: 3456||Name: Ho Jun Jae|
|Joining Date: 22/12/2012||PF No: KA/BA/02|
|Basic||Rs. 30,000/-||PF||Rs. 2,000/-|
|HRA||Rs. 13,000/-||Professional Tax||Rs. 200/-|
|Special Allowance||Rs. 3,000/-|
|Total Earnings||Rs. 54,250/-|
Faq’s on HRA Calculation
Q: Is there any maximum limit of the percentage of basic pay can be considered in calculating HRA? If My Gross Salary Per Month is Rs. 1,00,000/- and I am paying Rs. 50,000/- per month as rent in this case, can i consider basic as Rs. 30000/- pm and HRA Rs. 70000/- pm?
A: No limit for House Rent Allowance. But the limit is for exemption of HRA under section 10(10)The Assessee can consider the lower of following.
The Assessee can consider the less of following
1. 50% of salary (if you paid the house rent in a metro city) otherwise 40% of salary.
2. HRA Received.
3. Rent Paid is 10% of salary.It salary include only Basic Salary+ DA (As per terms of salary) + Commission
It the salary includes only Basic Salary + DA (As per terms of salary) + Commission all other not include under salary for calculation of HRA.
As per one of the CA expect this answer is given. The Answer may vary according to another question, but the formula may not change. So before filing the Income Tax Return consult your CA Expert so that you may not take a wrong step.