HRA Calculator

HRA Calculator

To safeguard the well-being of their employees from the rise in disposable income and inflation, many organizations offer a House Rent Allowance (HRA) to those residing in rented accommodations. This HRA calculator is designed to assist you in determining the allowance amount you are entitled to receive.

Following the recommendations of the 7th Pay Commission, the House Rent Allowance (HRA) slabs across India have undergone significant changes. Cities are now classified into three distinct categories namely:

• X (city with > 50 lakh population) = 24% of the basic pay
• Y (city with > 5 lakh <50 lakh population)=16% of the basic pay
• Z (city with < 5 lakh population)=8% of the basic pay

How Does House Rent Allowance (HRA) Work?

House Rent Allowance, commonly referred to by its acronym HRA, represents a component of your salary that employers allocate for expenses related to rented accommodation. You must reside in a rented property to be eligible for an HRA exemption. This exemption falls under Section 10(13A) in conjunction with Rule 2A of the Income Tax Act 1961.

The HRA provisions vary a little for self-employed and salaried people. The following table will clarify the same.

HRA Provisions for Salaried People	HRA Provisions for Self-Employed People
The HRA (House Rent Allowance) is typically calculated based on the employee's basic salary, the actual rent paid, and the city of residence.	Self-employed individuals are not eligible for HRA exemptions. However, they may claim a deduction under Section 80GG of the Income Tax Act (ITA).
The HRA amount an employee receives can differ according to the company's policies and the individual's salary structure.	Salaried employees who pay rent but do not receive HRA from their employers can take advantage of this provision.

Now, let us discuss how Investkraft’s HRA calculator works with the help of a detailed example. We will also provide the formula that our HRA calculator uses to calculate the exempted and taxable HRA amounts.

HRA Exemption Calculator Formula

HRA Tax Exemption Amount = Actual rent paid – 10% of basic salary

Note: Applying the aforementioned formula allows the identification of the least amount among these options to be deemed exempt from the taxable salary. It is crucial to acknowledge that individual circumstances differ, and tax regulations are subject to change. Consequently, consulting a tax professional or referring to the most current tax guidelines is recommended to guarantee precise calculations for one's unique situation.

Suppose Shruti is working at an MNC and she is staying in Delhi. The monthly rent she pays for her rented apartment is 5000 rupees. Her basic salary is 40,000 rupees per month. Now, let us discuss all the different components of her monthly earnings:

Particular	Amount (In INR)
Basic Salary	40,000/-
Medical Allowance	3000/-
Conveyance Allowance	3000/-
Special Allowances	3000/-
Total Earnings	64,000/-

To calculate the HRA deduction of Ms. Shruti, the following components of her annual earnings will be considered:

• Actual HRA component = 15,000/- (total = 15 * 12 = 1,80,000)
• Shruti resides in Delhi so 50% of her basic salary = 2,40,000/-

Now, put the above values into the formula:

• HRA Tax Exemption Amount = Actual rent paid – 10% of basic salary
• HRA T.E.A = (5000 * 12) - 10% (40,000 * 12)
• HRA T.E.A = 60,000 - 48,000 = 12,000/-

Ms. Shruti can claim a tax exemption of 12,000 rupees on her HRA. If she receives an additional amount as HRA beyond 12,000, the amount will be subject to taxation based on her income tax slab.

How to Use the HRA Exemption Calculator?

You do not have to be an expert or professional to calculate your HRA exemption using Investkraft’s HRA calculator. You simply have to follow the given steps:

1. Enter your basic salary amount (per annum) in the first tab
2. Enter the dearness allowance (per annum) you receive in the next tab
3. Enter how much HRA you receive per annum in this step
4. Enter the amount you pay as rent in a year
5. Select “Yes” if you are working in a metropolitan city, else select “No”
6. Click on the “Invest Now” button

What are the Benefits of House Rent Allowance (HRA)?

There are no such benefits of House Rent Allowance (HRA) except that salaried people can claim exemptions for HRA under Section 10 (13A), rule number 2A of the Income Tax Act. Those who are self-employed, cannot claim HRA but can avail of tax deduction benefits if they are living in a rented house under section 80GG of the Income Tax Act, 1961.