HRA Calculator- Calculate HRA from Basic

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What is HRA? 

The amount employees receive from the employer as a part of the paid salary is called HRA (House Rent Allowance). HRA offers tax benefits to the employees for the amount paid by them for accommodations every year. The employer decides the amount of HRA paid to the employees depending on certain criteria such as the city of residence and the salary. The provisions of the Income Tax Act’s Section 10 (13 A) regulate the house rent allowance.

Only salaried individuals can avail the benefits of house rent allowance. You are exempted from making a claim for HRA if you are a self-employed individual. You can avail this exemption only if you live in a rented accommodation. You cannot claim an HRA if you live in your own house and does not have to pay any rent.

In case you live in a rented accommodation and the rent you pay exceeds Rs. 1 lakhs in a fiscal year than the landlord’s PAN details will be required to be submitted with the HRA claims.

How is HRA Determined? 

HRA is determined basis your salary. There are a few other factors affecting it that include things such as the city where you are residing. If you reside in a metropolitan city then you are entitled to an HRA equivalent to 50 percent of your salary. For all the other cities you are entitled to 40 percent of your salary.

To calculate the HRA, the salary you get is defined as the sum of dearness allowances, basic salary and other commissions. If you do not get commissions or dearness allowance then the house rent allowance will be 40 percent or 50 percent of your basic salary.

The concrete HRA provided will be the most minuscule of the three provisions below:

  • The sum you receive as the house rent allowance from your employer.
  • Actual rent you pay minus 10 percent of your basic salary.
  • 50 percent of your base salary if you stay in a metro city and 40 percent in a non-metro city.

What is HRA Calculator? 

A few of your salary’s components can be exempted from tax without the requirement to invest in any of the instruments of tax-savings. One of these components is house rent allowance. To compute the amount of the HRA that you can exempt from tax, you can make use of HRA calculator.

House rent allowance calculator is an online tool designed to assist you to compute your HRA.

HRA Calculation:

The HRA, i.e. House Rent Allowance is a significant component of your salary that describes the total amount received from the employer towards your accommodation as rent. The sum of HRA can be useful for you as it is computed for deductions of taxes for a certain fiscal year. The HRA assists you to reduce your taxable income for which you are accountable to be paid. The tax benefits from HRA can be availed by only those employees who stay in rented accommodation. If you stay in your own house, you will not qualify to claim the tax deductions. HRA calculation depends on several factors like the right to 50 percent of the basic salary if you stay in a metropolitan city and 40 percent for those who reside in other cities.

The computation of HRA for benefits of tax is measured from any one of the provisions below:

  • The exact sum your employer allots as the House Rent Allowance
  • Actual rent you pay less than 10 percent of your basic salary
  • 50 percent of your base salary, if you stay in metro city while 40 percent for other cities.

The lowest of the above-mentioned figure will be taken into consideration for deduction of tax from HRA.

How to compute HRA? 

We are providing you with an example to make you understand how you can calculate HRA. There is a payslip below belonging to Siddhartha who stays in Bangalore in a rented house with a rent amount of Rs. 10,000 per month.

An example of Payslip:

Employee No. 751708

Name: Siddhartha Oberoi

 

 

DOJ: August 14, 2016

PF No.:  BG/BNG/0035224/000/0613682

 

 

Basic Salary

30,000

PF

2,000

HRA

13,000

Professional Tax

200

Conveyance

2,000

 

 

Special Allowance

3,000

 

 

Medical

1,250

 

 

LTA

5,000

 

 

Total Earnings

54,250

 

 

 

To compute Siddhartha’s HRA, which is exempted from his Income Tax we have:

Salary= Rs. 30,000 per month (the basic salary is taken into consideration in this case since no dearness allowance or commission is there).

The company provides HRA of Rs. 13, 000 per month that is the 10 percent of basic salary (10 percent of the annual basic salary) = Rs. 36,000.

Now let us compute the three scenarios:

  • The amount that the employer gives as HRA = Rs. 13, 000x12 months = Rs. 1,56,000
  • Actual rent that is paid less 100% of the basic salary = (Rs. 10,000x12 months)-Rs. 36,000 = Rs. 84,000
  • 50 percent of the basic salary since Siddhartha lived in a metro = Rs. 1,80,000

Siddhartha’s case gives you evidence that the amount of HRA that will be exempted from the tax will be Rs. 84,000 as for this the lowest of all the three scenarios.

You may also like: Best Way to Calculate Your HRA 

Rules for HRA Claims:

The rules mentioned below are appropriate for HRA claims:

  • The house rent allowance cannot go beyond 50 percent of the basic salary
  • The full rental amount that you pay cannot be claimed by you. The exemption will depend on the lowest of the following options:
  1. The exact amount that the employer allots as the HRA
  2. Actual rent that you pay less 10 percent of your basic salary
  3. 50 percent of your basic salary, if you reside in a metro city and 40 percent if you live in non-metro city.
  • You can avail HRA tax benefits together with a home loan.
  • If you stay with your parents, you can make of rent to your parents and get a receipt for a claim of HRA. However, as per the rules, you cannot claim HRA if you pay rent to your spouse.
  • It is mandatory to present the PAN card of your landlord if your rent exceeds Rs. 1,00,000 per year. The landlord will have the option of self-declaration if he does not have a PAN card.
  • In the case of NRI landlord, you must subtract 30 percent tax from the amount of rent that is required to be declared.
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