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What is HRA?

HRA or House Rent Allowance is a component of your salary provided by employers to help you cover your rental expenses. As per existing tax laws, you can claim a full or partial tax exemption on the HRA component of your salary. To understand how much HRA exemption you can claim, you can carry out an HRA calculation online. While manual calculations are possible, using an HRA calculator can make the process easier.

What is an HRA Calculator?

It is an online tool that can help you calculate the exact tax exemption on your House Rent Allowance. An HRA calculator will consider factors such as your basic salary, dearness allowance (DA), HRA received, rent paid, and your city of residence, to arrive at an accurate estimate.

The HRA calculator follows the provisions laid out under Section 10(13A) of the Income Tax Act, 1961, (ITA) and Rule 2A of the Income Tax Rules to help you get a clear idea of your HRA exemption amount. IndiaFirst Life offers an HRA Exemption Calculator that ensures quick and accurate results to help simplify your tax planning process.

Why is HRA Important?

It helps employees pay the cost of their rented accommodation, thereby making housing more affordable for them.

Employers use HRA to improve their compensation packages, which helps attract and retain talent.

HRA comes with tax exemptions as per Section 10(13A) of the ITA and Rule 2A of the Income Tax Rules to help individuals reduce their tax burden. Individuals can use the House rent allowance calculator to get clarity on their exemption amount.

How do Retirement Calculators work?

Formula to Calculate HRA With Example

Your HRA exemption amount is determined by various factors, including the rent you pay, your basic salary, whether you live in a metro or non-metro city, and so on.

Rule 2A of the Income Tax Rules states that the HRA exemption is the least amount of the following:

1. The HRA you receive from your employer

2. The actual rent amount you pay minus 10% of your basic salary (+ dearness allowance)

3. 50% of the basic salary (+ dearness allowance or DA) for those who live in a metro city

4. 40% of the basic salary (+ DA) for those who live in a non-metro city.

The rest of your HRA amount is considered a part of your taxable income. For a quick and hassle-free estimate of your HRA exemption, use our HRA calculator.

Example:

Let’s consider Mr Shivam who lives in Mumbai and has a basic salary of ₹40,000 per month. His monthly HRA is ₹25,000.

Mr Shivam lives in rented accommodation for which he pays a rent of ₹20,000 per month.

Now, let’s see the amount that Mr Shivam can claim as an HRA tax exemption:

HRA Calculator - House Rent Allowance Calculator

Sr no.	Particulars	Calculation	Amount
1.	The HRA received from the employer (in a year).	25,000x12	₹ 3,00,000
2.	Actual rent paid - 10% of the basic salary	(20,000x12) - 10% of (40,000x12)	₹ 1,92,000
3.	50% of the basic salary (since he lives in a metro city)	50% of (40,000x12)	₹ 2,40,000

The lowest amount from the above is ₹1,92,000 which corresponds to the actual rent Mr Shivam pays minus 10% of his annual basic salary.

Hence, Mr Shivan can claim an HRA exemption of ₹1,92,000. The remainder of his HRA earnings will be taxed as per the income tax slab he falls under.

In some rare cases, where the annual HRA is the lowest compared to the rest, one can claim a full HRA exemption.

Finding it tedious to carry out an accurate calculation of your HRA exemption? Let IndiaFirst Life’s HRA calculator come to your rescue.

How to Use the IndiaFirst Life HRA Calculator?

Using the HRA Calculator from IndiaFirst Life is easy, requiring only a few steps.

Enter Basic Salary + Dearness Allowance

You can find your basic salary and dearness allowance (if received) on your salary slip. Make sure to enter the annual earnings (monthly earnings x 12).

Input HRA received

Enter the total rent you have paid in the year.

Enter Rent Paid

Enter the total rent you have paid in the year.

Select Where You Live

Select an option which corresponds to where you live. Then, click on ‘Calculate’.

You will be able to see your taxable HRA amount and HRA exemption amount along with other relevant details.

How to Calculate HRA Tax Exemption in India?

Calculate HRA Exemption Manually /Offline

Calculate HRA Exemption Online

If you prefer to do the calculation of the HRA yourself, you must understand the basic components needed in the process, which are:

Answer: Your annual HRA earnings

Your annual basic salary (+ dearness allowance)

The total rent you paid in the year.

The lowest amount of the following will be your HRA exemption amount:

Answer: The actual HRA you received from your employer

The actual rent you paid in the year minus 10% of your annual basic salary (+ dearness allowance)

50% of your annual basic salary for those who live in a metro city

40% of the annual basic salary for those who live in a non-metro city.

Thanks to online tools, such as IndiaFirst Life’s HRA Calculator, you can carry out HRA calculations online with just a few clicks.

Answer

Simply enter the following details:

Your basic salary and dearness allowance
Your annual HRA
The total rent you paid over the year
Type of city you live in (metro/ non-metro).

All you need to do next to carry out an HRA calculation online is click on ‘Calculate’. You will then be able to see your taxable and exempted HRA amounts.

How Can an HRA Calculator Help You?

The HRA Calculator from IndiaFirst Life offers the following benefits:

Error-Free Calculations

The HRA Calculator from IndiaFirst Life will provide you with an error-free estimate of your HRA exemption. It uses an algorithm-powered process, which leaves no room for mistakes (which may occur in a manual attempt).

Reduced Time and Effort

With our easy-to-use HRA Exemption Calculator, all you need to do is enter a few details, such as your HRA, basic salary, dearness allowance, and rent paid. Once you have submitted the details, you will get results instantly. Compared to manual calculation, carrying out your HRA calculation online will take considerably less time and effort.

Customisable Results

An HRA Calculator offers you the chance to customise the figures you enter in the calculator. It allows the individual to get accurate estimates based on their unique financial status and tax profile. For instance, two individuals with the same HRA, basic salary, and the same rent amount, may have different results simply because one lives in a non-metro area. An HRA calculator considers these various nuances and provides customised results according to the individual.

Tax Compliance and Optimisation

Thanks to accurate estimates provided by the HRA Exemption Calculator, you can comply with HRA tax regulations with ease. The calculator also makes it convenient to optimise your tax savings, since you get reliable results regarding your taxable HRA and HRA tax exemption amount. It allows you to get a clear view of how much tax you can save and thereby reduce your tax liability accordingly.

Chance to Analyse Various Scenarios

Suppose you received a new job offer with a certain HRA or you get a good apartment to rent at a particular amount. If tax-saving is one of your important goals, you can check the tax benefits you can enjoy with these aspects (rent/HRA component of your new salary) with the HRA calculator. Instead of multiple manual calculations of HRA, a few clicks can do the work.

How HRA Exemption is Calculated for Special Cases

Calculation of your HRA tax exemption can become a bit challenging in some unique situations:

In the case of partial occupation of a house

If an individual has rented and stayed in the accommodation for only a part of the year, only the rent paid for those months will be considered. The individual must furnish the appropriate rent receipts to ensure a smooth process.

In the case of rented accommodation owned by a spouse

If the spouse owns the rented accommodation in which the individual resides, the latter may claim an HRA exemption if they prove that they pay rent to their spouse. In such a case, the rent amount must be at par with the prevailing market rates. Also, the spouse must show the rent earned as a part of their income.

In the case of rented accommodation owned by parents/ relatives

Similar to the above case, an individual may be renting accommodation owned by their parents or relatives. The individual can then claim an HRA exemption (limited to the actual rent paid) if they are able to furnish proof of rental agreement and transactions. The rental agreement in such a case must reflect a valid landlord-tenant relationship.

In the case of rent shared with a spouse

If you share rental expenses with your spouse but only have one rent receipt for the full amount, only a single person can claim an HRA exemption. If separate rent receipts can be availed, each of you can claim an exemption separately as per your respective contributions.

In the case of the individual owning a house in another city

If you own a house in one city but live (on rent) and work in another, you are still eligible to claim an HRA tax exemption. At the same time, you can also claim tax deductions on the home loan EMIs you pay for your owned house. Make sure to have sufficient proof for both.

In the case of the absence of an HRA component in salary

If your employer does not include HRA as a part of your salary package, you cannot claim an HRA tax exemption. You can claim tax benefits under Section 80GG, as long as the terms and conditions are met.

HRA Rules for Self-Employed Individuals

HRA comes in the form of an allowance in an employee’s salary package. Freelancers or self-employed individuals/ professionals are not eligible to receive an HRA exemption. They do not come under the ‘salaried employees’ category.

Self-employed individuals can claim tax deductions against their rent expenses under Section 80GG, considering all the terms and conditions are met.

Key Points about Deductions against Rent for the Self-Employed

A self-employed individual can claim deductions under Section 80GG equal to the least of the following:
₹5,000 monthly (or ₹60,000 yearly)
The annual rent you pay, minus 10% of your basic salary (including DA)
25% of the annual total income.
Section 80GG deductions are available only if the individual does not own any residential property at the place where they reside or carry out their business.
Similarly, the spouse or minor child of the individual must not own residential accommodation at the place where the individual resides or works.

Documents Required for an HRA Exemption Claim

As with other tax-related procedures, claiming an HRA tax exemption also requires a list of documents. You must submit the following:

Rent Receipts

A year’s worth of rent receipts is mandatory to claim an HRA exemption. The receipts should have essential details, such as the landlord’s name and address, the rent paid by the individual, the period for which it is paid, and so on. If you are claiming deductions under Section 80GG, you must furnish these to the Income Tax department. Salaried employees can provide the same to the HR department of their organisation.

Landlord’s PAN Card

If the annual rent you are paying is more than ₹1,00,000, you must provide the PAN details of your landlord and a copy of the PAN card to claim an HRA exemption. If the landlord does not have a PAN card, they can share a self-attested form declaring the same.

Rental Agreement

It is an important document to claim an HRA exemption, as it outlines the terms and conditions the landlord and the tenant have agreed upon. It is even more important if you pay rent to your parents or spouse. In some cases, you may also need to show copies of your bank statement as proof of the rental transactions. Cancelled rent cheques or proof of electronic fund transfers may also work.

Declaration Form (if applicable)

You may have to fill out and submit a form with your employer, declaring that you do not own residential property in the location where you are living on rent.

Form 10BA (if applicable)

Self-employed individuals must fill out and submit Form 10BA. By doing so, the individual declares that they are living on rent and do not receive any HRA benefits as a part of their compensation.

Utility Bills (in the tenant’s name)

Providing utility bills with the tenant’s name can cement their legality as an individual living on rent on that property.

Occupancy Certificate

If you are renting a house in a newly constructed building, you may have to provide an occupancy certificate as well, to claim the HRA exemption.

Conditions for Claiming an HRA Exemption

While there are no conditions to using our HRA calculator, claiming an HRA exemption does come with a few:

The individual must pay rent to their landlord and have adequate proof to support the claim.
They must have an HRA component as a part of their compensation package.
The taxpayer, their spouse, or their minor child must not own residential property in the city where the taxpayer lives on rent.
You can claim an HRA exemption under Section 10 (13A). Or you can enjoy tax deductions under Section 80GG. Claiming tax benefits under both is not permitted.

FAQs on HRA Calculator

View All FAQ

HRA Exemptions

Claiming HRA Benefit

What is 40% of the salary in HRA?

Answer: Rule 2A of the Income Tax Rules states that the maximum HRA exemption for those living in non-metro cities is 40% of the basic salary (+dearness allowance, if applicable).

Is Dearness Allowance (DA) taken into account when calculating HRA?

Answer: If you receive DA in your salary package, it will be considered along with your basic salary when calculating your HRA exemption. When using the HRA Calculator, you must enter the DA amount as well to get accurate estimates.

What is the formula used for calculating HRA tax exemption?

Answer: There is no exact formula for calculating your HRA tax exemption. One must compare the following and consider the least amount as the HRA exemption amount:

Actual HRA received

The actual rent you pay - 10% [basic salary (+ DA, if applicable)]

50% of the basic salary (+ DA) if you are a resident of a metro city

40% of the basic salary (+ DA) if you are a resident of a non-metro city.

What is the HRA rule for salary?

Answer: HRA is a component of your salary package meant to help you with rental expenses. It can help lower your taxable income. One must consider the actual HRA amount, the rent amount, their basic salary (+DA), and their location, to arrive at an accurate HRA exemption amount. IndiaFirst Life’s HRA Exemption Calculator can provide you with an accurate estimate in seconds.

How do I claim maximum HRA?

Answer: When submitting your claim, report correct details, such as rent paid, basic salary, and HRA received. You can also use our HRA Exemption Calculator to get accurate estimates and test various scenarios. It can help you claim the maximum HRA tax exemption amount.

What should I do if my landlord does not give me his PAN?

Answer: In that case, you should submit a written declaration stating the same, along with other relevant details.

What should I do if I forget to submit the rent receipts to my employer?

Answer: In such a situation, you can claim HRA when you file your income tax returns at a later date. Make sure to enter your total income adjusted with the HRA. It will give you a clear idea of the tax you need to pay, and you can claim a refund if tax is deducted in excess.