HRA Calculator
HRA Calculator
An HRA (House Rent Allowance) Calculator is a tool that helps you estimate the tax exemption available on your HRA component of the salary. The HRA is a component of the salary paid by the employer to the employee to cover the rent paid for accommodation. The HRA is partially or fully exempted from taxes based on certain conditions.
To use the HRA Calculator, follow these steps:
- Enter your basic salary, Dearness Allowance (DA) and HRA amount received from your employer.
- Enter the rent paid for the accommodation.
- Enter the city of residence (metro/non-metro).
- Click on the “Calculate” button to get the estimated tax exemption amount
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The HRA Calculator will show you the estimated tax exemption amount available on the HRA component of your salary. The HRA tax exemption is calculated based on the lowest of the following three amounts:
Actual HRA received from the employer
Rent paid – 10% of the basic salary
50% of the basic salary if you live in a metro city or 40% of the basic salary if you live in a non-metro city
It’s important to note that the actual HRA tax exemption may vary based on the individual’s salary structure, the rent paid, and the city of residence. Therefore, it is always advisable to consult a tax expert or use an HRA calculator to accurately estimate the HRA tax exemption.
HRA Calculation formula
The HRA (House Rent Allowance) calculation formula is used to determine the amount of tax exemption available on the HRA component of your salary. The formula for calculating HRA tax exemption is as follows:
A minimum of the following three amounts is considered for tax exemption:
- Actual HRA received from the employer
- Rent paid – 10% of the basic salary
- 50% of the basic salary if you live in a metro city or 40% of the basic salary if you live in a non-metro city
The basic salary, in this case, includes the basic pay and the Dearness Allowance (DA) that an employee receives.
Let’s understand this formula with an example:
Suppose your basic salary is Rs. 40,000 per month, HRA received from the employer is Rs. 20,000 per month and the rent paid is Rs. 15,000 per month. You are living in a metro city.
As per the formula, the HRA tax exemption will be calculated as follows:
- Actual HRA received from the employer = Rs. 20,000
- Rent paid – 10% of the basic salary = Rs. 15,000 – (10% of Rs. 40,000) = Rs. 11,000
- 50% of the basic salary for a metro city = 50% of Rs. 40,000 = Rs. 20,000
The minimum amount out of the above three will be considered for HRA tax exemption. In this case, the lowest amount is Rs. 11,000. Therefore, the HRA tax exemption will be Rs. 11,000.
It’s important to note that the HRA tax exemption amount may vary based on the individual’s salary structure, rent paid, and the city of residence. Therefore, it is always advisable to consult a tax expert or use an HRA calculator to accurately estimate the HRA tax exemption.