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.
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.
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.
The calculator compares the following three values:
The minimum value from these three calculations is the exempted HRA.
Basic Salary: ₹30,000
HRA Received: ₹14,000
Rent Paid: ₹12,000
City Type: Metro
The calculation compares the following values:
This tool helps you determine how much of your HRA is exempt from tax, allowing for better tax planning.