What is HRA?
House rent allowance (HRA) is one of the important components of your salary. All employers have to provide HRA as compensation for house rental expenses. However, most of us are not aware of the fact that we can also save tax on it. The HRA amount is decided based on factors like the employee’s salary structure, actual salary and the city in which he/she is residing. If you are a salaried employee living in a rented place, then you can calculate your tax liability using our HRA calculator.
What is an HRA Calculator?
In most Indian cities, the cost of living has risen considerably over the last decade or so. This is partly due to an increase in disposable income besides inflation. To ensure the welfare of their employees, many organizations provide a House Rent Allowance or HRA to the ones living in a rented home. This HRA calculator will help you determine the amount you receive as an allowance.
After the recommendation of the 7th Pay Commission, the HRA slabs across India have been changed to a great extent. Cities have now been categorized into 3 distinct slabs. Slab X has the most urban cities where you clearly need an HRA exemption calculator. Slab Y covers marginally low-cost cities.
How can an HRA Calculator Help You?
Using an HRA calculator online is of great benefit to those who receive a housing rental allowance from their employer.
There are 3 conditions on which you can claim an exemption under HRA.
- You have to be salaried and the HRA must be a part of the salary. You cannot use this calculator if you are a self-employed individual.
- Second, you must reside in rented premises.
- Lastly, the HRA has to exceed 10 per cent of your salary.
You can use the HRA calculator that we provide to evaluate how much tax you have to pay on your HRA. Here are several other advantages:
- Depending on the city you live in, you can claim HRA based on the calculated amounts. Slab X cities are more expensive to reside in while the costs go down with Slab Y and Z.
- The house rent allowance exemption calculator will help determine how much tax you need to pay in a financial year.
- HRA slabs also depend on the city you stay in. For example, if you stay in Calcutta, Ahmedabad, Mumbai, New Delhi or Chennai, the HRA allowance may go up to 27%. The figure may go down to 18% and 9% for the tier-2 and tier-3 cities.
- Depending on the quantum of your salary allocated as HRA, you can easily plan for the future using our HRA calculator.
How to Calculate HRA in India?
Groww uses a standard formula to determine the total House Rent Allowance payable. When it comes to HRA calculation, salary refers to the basic sum plus the Dearness Allowance, and other variable commissions.
Our product also works as an excellent HRA tax benefit calculator. The actual exemption limit will be the lowest of the 3 main heads below.
- The total (actual) rent paid minus 10% basic salary for each individual.
- The total (gross) HRA that the employer provides to the employee.
- Depending on how expensive the residential conditions are, 40 to 50% of the basic salary.
We can use a fictional example of Person A to identify the HRA payable. If we consider that he lives in Delhi at accommodated premises for which he has to spend Rs 12,000 every month, the following is his pay structure breakdown based on our HRA calculator.
|Salary component||Total amount (each month)|
|Basic salary||Rs 23,000|
|Conveyance allowance||Rs 3000|
|Medical allowance||Rs 1250|
|Special allowance under other heads||Rs 2300|
Adding the components, we identify that Individual A has a monthly salary of Rs 44,500.
Based on the three heads mentioned above, using our HRA allowance calculator, the figures that are churned out are:
- Actual rent paid minus 10% basic or Rs 9700
- HRA the employer offers is Rs 15000
- 50% of the basic salary is Rs 11,500
Since the least of these 3 sums is calculated as HRA, Individual A has to pay Rs 9700 as HRA. It will be exempted from his taxable income.
How to Use the HRA Calculator?
It is easy to use our HRA calculator when you know the steps.
Step 1: Enter your basic salary and HRA you get as per your salary slip
Step 2: Enter the actual rent paid and specify whether you live in a metro city or not from the drop-down.
The HRA calculation for income tax makes it easy for the employees to save tax.
Benefits of using an HRA calculator
The primary advantages that using a reliable HRA calculator in India are –
- The calculator never makes errors. You can use it as many times as you wish.
- You can claim tax exemptions based on the calculations.
- Finally, the calculator takes care of all the variables which are present as part of the HRA calculation.
Groww has a wide range of several other calculators you can see below. You are welcome to use them.
HRA Exemption Calculator – FAQs
Ques. How much of the HRA I earn is tax-exempt?
Ans. The following slabs apply in this instance.
- 50% of basic salary for big metros.
- 40% of basic salary for non-metro locales.
- Ordinarily, the gross HRA the employer pays is non-taxable.
Ques. Can I claim HRA tax exemption when my landlord is an NRI?
Ans. You can but 30% TDS is applicable.
Ques. Which documents prove I have paid my rent?
Ans. Receipts of the rent paid during the last financial year are applicable. If you do not have the receipts, you will have to show financial statements proving you have paid rent.
Ques. Can HRA and deduction be claimed simultaneously on home loans?
Ans. You can. According to the latest amendment to the IT Act, simultaneous applications are now a reality.
Ques. Is DA taken into account when calculating HRA?
Ans. Yes, it is. However, our HRA calculator will do it for you.