The House Rent Allowance (HRA) calculator helps estimate the tax liability and exemption amount on your housing allowance, making it easier to manage your finances.
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Taxable HRA
Exempted HRA
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HRA is an allowance employers provide to employees to meet their rental expenses if they live in rented accommodation. The purpose of the HRA is to assist employees in coping with the rising cost of living, particularly in cities where housing prices have increased significantly.
The HRA amount is usually a percentage of the employee's basic salary and is paid as a part of their CTC (Cost to the Company). The actual percentage may vary depending on the organisation's policies, but generally, it is around 40-50% of the basic salary. The HRA received by employees is partially or fully exempt from income tax, subject to certain conditions.
While calculating the HRA, you need to consider several factors as follows:
The HRA exemption is calculated as per 2A of the Income Tax, which states that the least of the following is exempted from salary under Section 10(13A).
The formula for HRA calculation is:
HRA Exemption = Minimum of (A, B, C)
After calculating the HRA exemption, the remaining HRA, i.e., HRA received - HRA exemption is added to your taxable income and is subject to income tax as per the tax slab you fall under.
Let us consider an example to understand this better. Suppose Mr Ram is living in Bangalore and is paying a rent of ₹15,000 per month. Here is Ram’s pay slip:
| Salary Components | Total Amount (Monthly) |
|---|---|
| Basic salary | ₹50,000 |
| HRA | ₹20,000 |
| Conveyance allowance | ₹5,000 |
| Medical allowance | ₹1,200 |
| Special allowance | ₹2,500 |
Adding all the salary components, Ram’s monthly salary is ₹78,700.
Step 1: Calculate the annual HRA received:
HRA received per month: ₹20,000
Annual HRA received: ₹20,000 * 12 = ₹2,40,000
Step 2: Calculate the total annual rent paid:
Monthly Rent Paid: ₹15,000
Annual Rent Paid: ₹15,000 * 12 = ₹1,80,000
Step 3: Determine the HRA exemption:
Actual HRA received from the employer: ₹2,40,000
50% of Basic Salary (since living in a metro city): 50% of ₹50,000 * 12 = ₹3,00,000
Actual Rent Paid minus 10% of Basic Salary: (₹1,80,000 - (10% of ₹50,000 * 12)) = ₹1,30,000
HRA Exemption = Minimum of (a, b, c) = Minimum of (₹2,40,000, ₹3,00,000, ₹1,30,000) = ₹1,30,000
Step 4: Calculate the taxable HRA:
Taxable HRA = Annual HRA received - HRA Exemption = ₹2,40,000 - ₹1,30,000 = ₹1,10,000
In this example, the taxable HRA of ₹1,10,000 will be added to Ram’s taxable income while filing their income tax return. Ram can claim an HRA exemption of ₹1,30,000, and the remaining HRA of ₹1,10,000 will be subject to income tax as per the applicable tax slab.
However, manual calculations are prone to errors and are time-consuming. This is where an online HRA calculator comes to your rescue.
An HRA calculator is used to determine the amount of HRA you are eligible for. The calculator takes into account various factors such as the employee's basic salary, the actual rent paid by them, and the city category or HRA slab in which they reside.
The online HRA calculator eliminates the scope for errors and saves time in calculating the HRA. You just have to enter the basic details of your salary and determine the taxable HRA and exempted HRA in less than a minute.
Using an online HRA calculator on Angel One is typically a simple and straightforward process. Here are the steps to follow:
That’s it! The HRA Calculator on Angel One will determine the exempted HRA and Taxable HRA in seconds.
Let us consider an example to understand the usage of the HRA calculator better. Suppose you live in Mumbai and your basic annual salary is ₹2,70,000, your HRA received is ₹1,00,000, there is no dearness allowance, and the rent paid in the financial year is ₹1,20,000. Enter the same details in the online calculator.
The calculator computes the values and determines that the exempted HRA is ₹93,000 and the taxable HRA is ₹7,000.
An HRA calculator can help individuals receive a housing rental allowance in several ways:
By utilising an HRA calculator, individuals can gain a clear understanding of their HRA exemption and tax liability and plan their finances accordingly. It simplifies the process of evaluating the impact of HRA on their overall income and aids in optimising tax savings while ensuring compliance with the applicable regulations and slabs specific to their city.
An online HRA calculator is designed to provide accurate calculations based on the information provided. However, it's important to note that the calculator's results are estimates and should be cross-checked with applicable tax guidelines and regulations.
The results generated by an HRA calculator are for informational purposes and serve as a guide. They are not legally binding. The actual tax treatment and exemptions may vary based on the applicable tax laws and regulations in your country.
HRA calculators are generally designed for salaried individuals who receive an HRA as part of their salary. Self-employed individuals may not be eligible for HRA exemptions. However, they may have other provisions and deductions available to them, depending on the tax laws of their country.
Yes, you can claim HRA by paying rent to your parents, provided they are the actual owners of the property and have a valid rental agreement with you. Also, your parents must declare the rental income in their tax returns as well.
If you forgot to submit the rent receipts to your employer for HRA exemption, you can still claim the benefit while filing your income tax return.
If your annual rent is more than ₹1,00,000, it is important to submit your landlord’s PAN to claim HRA or else your TDS rate on the rent may be high.
Yes. You can claim both benefits in the same year. However, you need to meet the condition that the house loan property and your rented accommodation are two different properties.
Yes, you can claim HRA if you own a house in one city and live in rented accommodation in another city for employment purposes.
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