How To Calculate HRA Step By Step

HRA Tax Exemption

House Rent Allowance (HRA) is one of the most important components of the salary. As per the income tax Act of 1961, certain parts of the employee's House Rent Allowance (HRA) are exempted from taxation. To determine the amount of HRA from salary, certain fixed criteria need to be justified and such calculations are part of income tax calculations. The HRA amount can be claimed by a person who is living in a rented house. A person who is living in his/her own house is not eligible to claim HRA deductions. 

HRA in New Tax Regime

The income tax returns are filed in the old and new tax regimes. The old tax regime is sophisticated with a certain set of exemptions and the people usually claim savings up to 2 lakhs. The old tax regime is wonderful where people are forced to save money and tax both simultaneously. 

The one who will the new tax regime and file the ITR accordingly, he/she will not be able to claim HRA exemption at all.  

Conditions For HRA Claim

There are three basic conditions under which one can claim the HRA. Those conditions are as follows- 

• HRA is exceeding 10% of the employee's salary
• Employee must have to reside in rented premises
• The person must have been salaried and the HRA is part of the employee's salary. One who is self-employed can not claim HRA. 

HRA Exemption Calculation Example

The HRA computation of Mrs. Kanchan who is residing in Bangalore in a rented accommodation. She is paying the monthly rent of 10, 000 INR. The amount of rent paid by her in a calendar year is 1.2 lacks. Some of the other details from her earning has been tabulated below-

• Actual HRA component of salary

          Total HRA in a year= 12*11, 000 = 132, 000 INR

• 50% of his basic salary,

           As he stays in Bangalore: (50% * Rs.54,000 * 12) = Rs.3.24 lakh 

• Actual rent paid minus 10% of basic salary:

          (Rs.11,000 * 12) - (10% * Rs.54,000 * 12) = Rs.1.32 lakh – Rs.64,800 = Rs.67,200

Since the least amount from the above example is 67, 200 INR thus the HRA claimable amount will be 67200. The rest amount will be claimed as the standard 

Important Points for HRA Claim

1. If the rent payment is more than 1 lakh, the landlord's PAN card is mandatory.
2. Anyone who is living in his own house, can not claim HRA exemption. 
3. HRA  can not be claimed if opting for New Tax Regime in ITR filing. 
4. If one's house is under maintenance and currently he/she is living in a rented house, they can claim HRA exemption. 
5. If one doesn't have a rent receipt still he/she can claim HRA exemption provided that they must have a rent agreement and rent claiming bank statement. 
6. One who is living in their parent's house, can claim HRA exemption by generating suitable bills/receipts. 

HRA Exemption Calculator 

In India, As the cost of living is increasing, most organizations are trying to ensure employee welfare. In this context, many companies are providing a house rent allowance or HRA to those who are living in rented houses.

This HRA calculator is in the form of an Excel sheet with certain input options marked in yellow color. Once the suitable input has been entered the exact HRA exemption that needs to be claimed will be displayed in the suitable cell.