HRA Calculator: Everything you need to know
If you are a salaried employee and live in a rented house, then House Rent Allowance (HRA) can be a great way to save on taxes. However, people often get confused about how much tax benefit they will receive. But now there’s no need to worry! With the help of this HRA Calculator, you can easily calculate your tax-free HRA in just a few seconds.
What is HRA (House Rent Allowance)?
HRA (House Rent Allowance) is the part of your salary that your company gives you to cover your living expenses, also known as rental expenses. According to Section 10(13A) of the Income Tax Act, if you are living in rented accommodation, you can claim a tax exemption on your HRA. However, please note that if you live in your own house, the entire HRA is taxable.
HRA Calculation Formula (The 3 Golden Rules)
The HRA exemption is not fixed. Therefore, the Income Tax Department considers the lowest of the following three amounts as tax-free:
- Actual HRA Received: The amount mentioned as HRA on your payslip.
- Rent Paid – 10% of Salary: Subtract 10% of your salary from the total rent paid during the year.
- 40% or 50% of Salary: * If you live in a metro city like Delhi, Mumbai, Kolkata, or Chennai, it’s 50% of your salary.
- If you live in a non-metro city, it’s 40% of your salary.
Note: Here, ‘Salary’ means: Basic Pay + Dearness Allowance (DA). Other allowances are not included.
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Step-by-Step Guide: How to Use the HRA Calculator?
This HRA calculator is very simple to use. If you are a salaried employee and live in a rented property, this tool will tell you how much tax you can save. Follow the steps below to calculate your tax exemption:
Fill in Basic Salary and DA
First, enter your Annual Basic Salary in the ‘Enter Details’ section. If you receive Dearness Allowance (DA) (which is common in government jobs or older pay scales), enter the annual amount for it as well. If you don’t receive it, leave it as 0.
Enter HRA Received
Look at your salary structure or payslip. Enter the total amount of House Rent Allowance you receive from your company for the entire year.
Enter Total Rent Paid
Fill in the total amount of rent you paid to your landlord for the entire year (financial year).
Tip: If you do not pay rent or live in your own home, you will not get the HRA exemption.
Select City Type
This step is very important because tax rules change based on the city:
-Metro: If you live in Delhi, Mumbai, Kolkata, or Chennai, select “Metro.”
-Non-Metro: For any other city besides these four, select “Non-Metro.”
How to Understand the Results?
As soon as you fill in the details, the calculator will show the result on the right side of the desktop or at the bottom on a mobile:
Total HRA Exemption: This is the amount on which you will not have to pay tax.
Exemption Breakdown: According to Income Tax rules, 3 conditions are checked:
-Actual HRA you received.
-40% or 50% of your Basic Salary.
-Rent Paid minus 10% of your Salary.
Lowest Value: The calculator will automatically take the lowest of these three amounts as the tax-free (exempt) amount. It will be highlighted in green.
Net Taxable HRA: This is the remaining amount that will be added to your income and on which you will have to pay tax according to the normal slab rate.
Important Things to Remember (Pro-Tips)
- Old vs New Tax Regime: The benefit of HRA exemption is only available in the Old Tax Regime. This facility is not available in the New Tax Regime.
- Landlord’s PAN: If your annual rent is more than ₹1 lakh, providing the landlord’s PAN card number is mandatory to claim the exemption.
- Rent Receipts: Always keep your rent receipts and rent agreement safe because the Income Tax department may ask for rent receipts as proof at any time.
- Paying Rent to Parents: Did you know? You can also claim HRA by paying rent to your parents, provided the house is in their name and they declare this income in their tax return.
Don’t you receive HRA? Section 80GG is for you!
Many people don’t have an HRA component in their salary, or they are self-employed. If you are living on rent but don’t receive HRA, don’t worry! You can claim a tax deduction under Section 80GG.
Conditions for Claiming Section 80GG Deduction (Eligibility):
- No HRA: You should not be receiving House Rent Allowance (HRA) from any source.
- No Own House: You, your spouse, or your minor children should not own a house in the city where you work.
- Form 10BA: To claim this deduction, you need to fill out Form 10BA on the Income Tax portal.
How much deduction will I get? (Limit):
- The calculation is done under Section 80GG, and the lowest of the following three amounts will be deductible:
- ₹5,000 per month, which is up to ₹60,000 annually.
- 25% of Total Income (i.e., the amount remaining after deducting capital gains and other deductions from your total income).
- Actual Rent Paid – 10% of Total Income.
Example: If your annual income is ₹8 lakh and you pay ₹1.5 lakh in rent annually, you can claim an additional deduction of up to ₹60,000 as per the rules, even if you are not receiving HRA.
HRA calculation rules can be a bit complicated, so we’ve kept this tool simple so you can easily check your tax exemption. Although our calculator operates according to the updated tax rules, we always recommend that you cross-check once with the government’s official website. For your satisfaction, you can use the Income Tax Department’s official HRA utility, which provides accurate calculations under Section 10(13A). This will give you even more clarity in your tax planning and ITR filing.
Frequently Asked Questions
How much HRA is exempt from income tax?
HRA is not fully exempt (tax-free). According to Income Tax Rule 2A, the lowest of the following three amounts is exempt:
Actual HRA received.
50% of salary (Metro city) or 40% (Non-Metro).
Rent paid minus 10% of salary.
Can I claim HRA if I don’t get HRA in my CTC?
Yes, absolutely! If your salary does not include an HRA (House Rent Allowance) component, you can claim a deduction under Section 80GG. This allows you to save up to ₹60,000 annually (₹5,000 per month) in taxes.
Can I claim both HRA and Home Loan interest?
Yes, this is possible. If you own a house for which you are paying a mortgage, but for some reason, such as your job location being far away, you are living in another house on rent, then you can claim both benefits simultaneously.
Is the PAN of the landlord mandatory for the HRA exemption?
If your annual rent is more than ₹1,00,000 (One Lakh), then it is mandatory to provide your landlord’s PAN number. If the landlord does not have a PAN number or refuses to provide it, then it is necessary to obtain a ‘Declaration’ from them.
Can I pay rent to my parents and claim HRA?
Yes, you can claim HRA by paying rent to your parents. However, you need to keep a few things in mind, such as the house should be in your parents’ name, you should maintain rent receipts and bank transfer records, and your parents will have to declare this rent as their income and pay tax on it if their income exceeds the taxable limit.
How to calculate HRA if I change my city in mid-year?
If you change cities in the middle of the year, for example, from Delhi to Lucknow or to a non-metro city, then you will have to calculate your HRA separately. The calculation will be based on 50% for the initial months (while in a metro city) and 40% for the remaining months (while in a non-metro city).
Can I claim HRA if I forgot to submit rent receipts to my HR?
Absolutely! If you haven’t submitted the documents to your company, you can directly claim the exemption while filing your Income Tax Return (ITR). The tax (TDS) deducted by the company will be refunded to you.
What is the maximum limit for HRA exemption?
There is no fixed upper limit for HRA exemption, unlike the ₹1.5 lakh limit for Section 80C. It depends entirely on your basic salary, HRA received, and rent paid.