What is HRA?
HRA or House Rent Allowance is an allowance that salaried individuals receive from their employer for meeting the rental expenses of their house. The amount received is partly exempted from tax for the employees who are residing in a rented house. In case the employee lives in his/her own house and does not pay any rent, the entire amount would be taxable.
How is HRA calculated for tax saving?
| HRA received | xxx |
|---|---|
Less: Exempted HRA (minimum of following three amounts)
| (xxx) |
| Taxable HRA (to form part of salary for tax purpose) | xxx |
*For above calculations, the salary would be taken as Basic Pay + D.A. (if considered for retirement benefits) + Commission. You can use our free HRA Calculator to calculate your exemption amount.
What is HRA Calculator?
HRA calculator is a simple tool that can help you calculate the HRA exemption you can claim in just a few clicks. This tool is handy for those who don’t have proper knowledge about provisions and don’t want to go through the manual hassle. The HRA calculator is accurate and quickly calculates the HRA exemption amount.
How HRA Calculator Works?
Here are the steps to use the HRA Calculator –
- Select whether you are living in a ‘Metro City’ or ‘Other city’.
- Enter the amount of Basic Salary + DA + Commission Received
- Enter the actual amount of HRA you have received from your employer
- Enter the actual rent paid by you.
- Now fill in your email address and click ‘Submit’.
- The HRA calculator will automatically calculate the amount of HRA exemption that you can avail of.
To reduce your tax burden and save your hard-earned money from taxes, it is important to plan your investments (exemptions and deductions). Plan your Taxes Today.
Benefits of HRA Calculator
Quick: HRA calculators are very fast and effective. You don’t have to spend long time doing manual calculations. You can calculate HRA using HRA calculator in a matter of minutes. All you have to do is enter a few basic details about the HRA received and rent paid, and you can calculate your exemption.
Easy to Use: HRA calculators are extremely easy to use and understand. Even laymen with zero knowledge of taxes can easily compute their HRA exemption using an HRA calculator.
Accurate: HRA calculators do not make mistakes and are accurate. It considers all the rules and regulations to give you the most accurate results.
Documents Required for HRA Exemption claim
It depends on the amount of rent paid:
- If your monthly rent is less than Rs. 3,000- No rent receipts are required
- If your monthly rent is more than Rs. 3,000- Rent receipts are to be submitted. Click here to Generate Rent Receipts.
- If your monthly rent is more than Rs. 8,333, the PAN of the landlord is also required. If the landlord does not have a PAN, a declaration from the landlord is to be submitted. Read further details here.
Eligibility for HRA Exemption Claim
To claim House Rent Allowance (HRA) exemption in India, you need to meet the following eligibility criteria:
- Salaried Individual: You must be a salaried individual receiving HRA as part of your compensation package. Self-employed individuals or those not receiving HRA are not eligible for this exemption.
- Payment of Rent: You must pay rent for the residential accommodation you occupy. If you live in a house owned by you, HRA exemption does not apply.
- HRA Component: Your salary structure should include an HRA component. It’s essential that your employer provides you with HRA, and this amount should be specified in your salary slip.
- Actual Rent Paid: You must be paying actual rent for your accommodation. The rent should be paid for the house you are currently residing in, and you should have documentary evidence of these payments.
- Location: The house for which you pay rent should be in a city, town, or area where HRA is applicable. HRA exemptions vary based on the location, with higher exemptions typically available in metropolitan cities.
- Not Owning a House in the Specified Location: You should not own a house in the city where you are claiming the HRA exemption. If you own a house in a different city and live in rented accommodation, you can claim the exemption for the rent paid.
- Part of Salary: HRA exemption is a part of your taxable salary, so you need to declare your HRA as income while filing your income tax return.
- Furnish Rent Receipts: To claim the exemption, you need to provide rent receipts or a rental agreement as evidence of rent payment to your employer. You should also have your landlord’s PAN (Permanent Account Number) for rent payments exceeding Rs. 1 lakh per year.
- Exemption Calculation: The HRA exemption is calculated based on the least of the following:
a. The actual HRA was received.
b. Rent is paid minus 10% of your salary.
c. 50% of your salary (if you live in a metro city) or 40% of your salary (if you live in a non-metro city). - Submit Proof: You must submit your rent receipts and any other required documents to your employer to claim the HRA exemption.
How much of HRA is exempt from tax?
The amount of HRA that can be availed as an exemption from the taxable salary is calculated using the following HRA calculation formula.
The HRA exemption or deduction is calculated based on the least of the following three amounts:
- The actual amount of HRA received by the employee.
- – 50% of the basic salary, if the employee resides in a metropolitan city.
– 40% of the basic salary, if the employee resides in a non-metropolitan city. - Actual rent paid by the employee – 10% of basic salary
The least among the above is considered exempt from the taxable salary.
Here,
Basic salary = Basic salary + DA (Dearness allowance forming part of salary) + Commission (as % of turnover achieved by the employee)
Example of how HRA Exemption is calculated
Let’s assume you receive a monthly HRA of Rs. 20,000, and you live in a metro city. Your basic salary is Rs. 40,000 per month, and you pay a monthly rent of Rs. 15,000 for your accommodation.
To calculate your HRA exemption, you need to consider three scenarios and select the one with the least amount:
- Actual HRA Received: Rs. 20,000 per month.
- Rent Paid minus 10% of Salary: Rent paid (Rs. 15,000) minus 10% of your salary (10% of Rs. 40,000 = Rs. 4,000) = Rs. 11,000.
- 50% of Salary (since you live in a metro city): 50% of Rs. 40,000 = Rs. 20,000.
In this case, the least of these three scenarios is Rs. 11,000 (Rent Paid minus 10% of Salary). Therefore, your HRA exemption is Rs. 11,000 per month.
Your taxable HRA is the actual HRA received minus the exemption: Rs. 20,000 – Rs. 11,000 = Rs. 9,000 per month. This is the amount that will be added to your taxable income for the purpose of income tax calculation.
FAQ
Q Can I avail of HRA’s tax benefit if I live with my parents?
Yes, you can claim HRA tax exemption by paying rent to your parents, provided certain conditions are met It is advisable to have a rent agreement. You would need rent receipts to claim HRA exemption. Also, your parents need to show rental income received from you in their income tax return.
Can I avail of the tax benefit of HRA if I am living in my spouse’s house?
Tax benefits of HRA cannot be claimed by paying rent to your spouse. So, if you are staying in a house owned by your spouse, then HRA exemptions are not available to you. However, if you still wish to claim exemption, you should be ready for litigation as the Income Tax Officer might allow it as per the decision in one of the cases in the Ahmedabad Tribunal.
Q Can I claim tax benefit from HRA if I live in my own house?
No, you cannot claim tax benefits under HRA if you live in your own house. Since you cannot pay rent to yourself, no HRA exemption is available in such a case. As a result, the entire HRA received becomes fully taxable under the head “Income from Salary.”
Q Is a landlord’s PAN required for HRA exemption? What should you do if the landlord does not have a PAN?
If the annual rent paid exceeds Rs.1,00,000/- it is mandatory to report the PAN of the landlord to claim HRA exemption. In case the landlord does not have a PAN, the tenant must obtain a written declaration from the landlord confirming the same. This declaration should be submitted along with rent receipts to support the HRA claim.
Q Can I claim HRA if the landlord refuses to give his PAN?
If the annual rent exceeds Rs. 1,00,000 and the landlord refuses to give his PAN, then you cannot claim HRA for the rent paid in excess of Rs. 1,00,000/- and your employer will deduct the TDS accordingly. Therefore, discussing this with your landlord before taking the house for rent is advisable. However, you can claim the benefit of rent paid at the time of filing of your return if the payment of rent can be substantiated to the income tax officers if required. Need a CA opinion? Contact Now!
Q I stay in a rented house, but I also own a house. Can I claim an HRA exemption?
You can claim HRA even if you own a house, whether in the same city or elsewhere, as long as you live in a rented property. However, if the owned house is in the same city, you may need to justify why you’re renting. To do so, you should provide:
- A valid reason (e.g., distance from work, house condition, family needs).
- Supporting documents like a rent agreement and rent receipts.
Q Is it possible to claim HRA as well as home loan tax benefits?
Yes, certainly. You can claim both. If you are staying in a rented house, you can claim an HRA tax exemption. Simultaneously, if you have taken a house loan, then you can claim the house loan benefits, too. If you have bought a house with the help of a home loan and live in another house on rent, you can claim tax benefits for both. But if the house you bought and the house you live in are in the same city, you should have a genuine reason for not living in the house that you own to prove to the Income Tax Officer. The reasons could be that the house you own is too far from your workplace, or the commute is very difficult. Still Confused? Need CA opinion. Connect Now!
Q Can both the working spouses claim HRA tax benefits separately?
Yes, why not, provided both are paying rent? Also, it will be better if the landlord issues two separate rent receipts or specifies the proportion of rent borne by each person on the rent receipt.
Q If HRA is not mentioned in FORM 16, how can I claim the HRA?
Many times, it’s observed that companies do not give HRA exemption in Form 16 due to the unavailability of complete details. If your HRA claim has not been considered in Form 16, then you can directly claim the exemption in your IT return. Our experts are here to help you claim all the available tax exemptions and deductions & file your IT return in a hassle-free manner. Connect Now to know how!
Q How can a self-employed person claim tax benefit for the rent paid?
A self-employed person doesn’t receive any salary, so there is no HRA, and consequently, the question of HRA exemption does not arise.
However, to take care of such a situation, there is a separate provision in the Income Tax Act whereby a person not in receipt of HRA but incurring rent expenses for his residence can claim a deduction under section 80GG.
Q What if I pay rent but do not receive HRA?
If you are paying rent but are not receiving HRA, you can claim a deduction under section 80GG. The least of the following amounts is available as a deduction:
- Rent paid less than 10% of total income (excluding LTCG, STCG and Income under Section 115A or 115D and deductions under 80C to 80U)
- Rs.5,000 per month
- 25% of total income
However, following points must be kept in mind:
- You, your spouse, and minor child do not own a residential house in the city where you are working
- You are not in receipt of the house rent allowance.
- If you own a house in the city [other than the city where you reside], it must not be assessed as a self-occupied house.
In a nutshell, this benefit is available only to those who do not have a house and live in rented houses.
Q Do HRA exemptions include maintenance charges on a rented property?
Maintenance charges are not considered as property owner’s earnings. Therefore, there is no exemption available for such expenses. The same goes for electricity expenses.
Q Can I claim HRA exemptions even if my employer does not include housing rent allowance in my salary?
If you are living in a rented property, you can claim a deduction under Section 80GG instead of Section 10(13A), provided you meet the following conditions:
- No HRA received.
- Rent paid for residential property.
- No ownership of property at the work location.
- Form 10BA declaration and rent receipts are required.
Q What if I forgot to submit rent receipts to my employer?
HRA can still be claimed while filing your Income Tax Return. If you missed submitting rent receipts to your HR during proof submission, you can claim HRA directly in your ITR. Simply adjust your taxable income to include the HRA benefit and recalculate your tax accordingly. If excess tax was deducted, you may be eligible for a refund.