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HRA Calculator

HRA Calculator

What is HRA?

HRA stands for House Rent Allowance. That portion of an employee's salary provided by the employer to pay for rental expenses. It is majorly paid to a salaried individual dwelling in rented accommodations. The HRA component provides a benefit under section 10(13A) of the Income Tax Act, 1961, as according to rules specified by the tax department. The exact amount of the exemption may vary based on the employee's salary, HRA he receives, actual amount paid as rent, and location where he stays.

A salaried person qualifies for tax relief on HRA if certain specified conditions are satisfied, for instance, a rent payment and living in rented accommodation. The HRA exemption would, therefore, help to lessen taxable income and consequently form an important source of tax relief.

How is HRA Calculated for Tax Saving?

The HRA exemption for tax purposes is calculated using the following formula:

The minimum amount of the three above is the HRA exemption. As it reduces taxable income, it saves the taxes of workers. Workers have to be able to provide evidence of paid rent in order to be eligible for the benefit of HRA. This could be in the form of a rent receipt or the rental agreement.

For example, if your monthly rent is higher than 10% of your basic salary, and your employer provides HRA as part of your salary, you can claim the tax benefit on the rent paid, within the limits mentioned above.

How sscoindia HRA Calculator Works

The SSCO HRA Calculator helps you calculate the portion of your House Rent Allowance (HRA) that is exempt from tax based on your salary, rent, and city of residence.

Here's how it works:

  • 1. Basic Salary: Enter your monthly basic salary, excluding other allowances.
  • 2. HRA Received: Input the monthly HRA amount provided by your employer.
  • 3. Rent Paid: Enter the actual rent amount you pay for your accommodation each month.
  • 4. City Type: Choose between a metro city (like Delhi, Mumbai, Kolkata, or Chennai) or a non-metro city, as HRA exemptions differ based on this factor.

Calculation Process:

The calculator compares the following three values:

  • 1. Actual HRA received from your employer.
  • 2. Rent paid minus 10% of basic salary.
  • 3. 50% of basic salary if you reside in a metro city, or 40% if you live in a non-metro city.

The minimum value from these three calculations is the exempted HRA.

Example:

Basic Salary: ₹30,000

HRA Received: ₹14,000

Rent Paid: ₹12,000

City Type: Metro

The calculation compares the following values:

  • Actual HRA received: ₹14,000
  • Rent paid – 10% of Basic Salary: ₹12,000 - ₹3,000 = ₹9,000
  • 50% of Basic Salary for Metro: ₹15,000
The exempted HRA will be the minimum value: ₹9,000.

This tool helps you determine how much of your HRA is exempt from tax, allowing for better tax planning.

Frequently Asked Questions (FAQ)

Can I pay my parents' rent and still receive HRA?

Yes, that is possible if one claims HRA and pays rent to parents. But it should be paid by the proper banking channel and would be reported as income in the hands of the parents. It is very much advisable to keep a proper record in the forms of rent agreement and rent receipts as proof.

What should I do if I forgot to give my employer the rent receipts?

If you forgot to submit the rent receipts to your employer, you may still be able to claim the exemption under HRA while filing returns. All you would need to do is attach the rent receipts with all other documents at the time of submitting your returns and would have handled the issue of the deduction.

What should I do if my landlord refuses to provide me with his PAN?

Now, if the landlord is not ready to divulge his PAN and your rent is above ₹1,00,000, you would mention that in your return. In any such case, it will be wise to hold on to other proofs of rent payments, like bank transfers, to cover your claim on HRA during the return process.