House Rent Allowance (HRA) is a deduction that will help salaried employees to lower taxable income. Employers pay HRA to employees. HRA calculation for the purpose of deduction can be quite complex. Hence one can use an HRA calculator to estimate their deduction amount and plan their taxes well in advance.
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House rent allowance, most commonly known as HRA, is an important component of a salary slip. It is the amount payable by the employer to their employee as part of the salary. In other words, HRA is the amount an employer pays to an employee to meet their accommodation expenses. HRA provides tax benefits to the employees towards the payment of accommodation. The allowance varies on the basis of salary and city of residence.
Section 10(13A) of the Income Tax Act, 1961 regulates the provisions of HRA. The provisions of HRA are beneficial to salaried employees. The major advantage of HRA is that it helps in reducing the total taxable income. Therefore, HRA reductions help in reduction in tax that the taxpayer has to pay.
Salaries of both public and private sector organisations have a HRA component in their salary break up. There are various sections of the Income Tax Act that help salaried, self employed individuals and professionals to make their rent expenditure cheaper.
Self employed individuals can also claim for HRA deductions under Section 80GG.
The amount of HRA is deductible from the total income before determining the taxable income. One can determine the HRA on the basis of their salary. According to the income tax rules, the tax exempt portion of the HRA is the minimum of the following amounts:
In case the house rent paid by an individual is greater than INR 1,00,000, they can claim the HRA tax exemption towards it. For this, they have to provide the PAN details of the residence owner (property owner) along with rental receipts.
Following are the rules applicable to claim HRA:
Following are the documents required to claim HRA tax exemptions:
Also, an employee can pay rent to their father and claim tax exemptions with respect to HRA.
HRA is one of the crucial components of an individual’s salary. It is the total amount employers pay employees towards their accommodation. The amount allotted towards HRA is tax deductible. Hence HRA calculation becomes important.
HRA calculation is based on a number of factors including the city of residence, the rent paid, and actual HRA received. HRA will be the least of the below mentioned amount. This will qualify for a tax deduction.
Let’s understand the deduction better with the help of an example.
Ms Divya gets a basic salary of INR 1,00,000 per month. Dearness allowance is INR 90,000, and HRA is 30,000. She pays a monthly rent of INR 25,000 for her house which is in Hyderabad.
Her HRA deduction for the purpose of Income Tax will least of the following:
For calculating HRA, the following are required:
The least of the following scenarios will be the amount that Ms Divya can claim for deduction:
The least amount is INR 72,000. Hence Ms Divya can claim a tax deduction of INR 72,000.
A house rent allowance calculator is a tool that simplifies the calculation of HRA to claim a tax deduction. It does a complex calculation within seconds for salaried individuals. It considers basic salary, dearness allowance, HRA received, rent paid, and the city of residence before calculating the HRA amount. Following are the inputs required by the HRA calculator:
Once the taxpayer inputs the above data in the house rent allowance calculator, the output will be the actual HRA amount that he/she can claim as a deduction.
Scripbox’s online HRA calculator makes the HRA calculations easy and effortless. The results from the calculator are quite accurate. Investors can easily calculate the HRA exemption and HRA taxable.
One can follow the steps below to use Scripbox’s HRA calculator.
Enter the following details:
Upon clicking calculate, the calculator determines the HRA exemption and HRA taxable.
Let us understand this with an example. Ms Shresta lives in Mumbai, and the basic salary she receives is INR 30,000. The Dearness Allowance is INR 30,000. The HRA received is INR 15,000. The rent that she pays is INR 15,000. Since she lives in a metro city, the HRA amount that is exempt from tax is INR 9,000 and taxable HRA is 6,000.
Following are the benefits of using HRA calculator:
Following are the components that form part of the Income side of the salary statement:
Following are the components that form part of the Deduction side of the salary statement:
To claim HRA, one would need the following documents:
No, one cannot claim HRA deduction if they are living in their own house. Nobody pays rent if the property they are residing is of their own and is self-occupied. HRA deduction is only for rent paid.
Can I claim both home loan interest and rent paid?No, one cannot claim both home loan interest and rent paid (HRA) while filing income tax returns. Since it’s a person’s own house, they cannot claim HRA or rent paid. However, one can claim tax exemption on both the principal and interest that they pay on the home loan.
You can use Scripbox’s home loan EMI Calculator to find your monthly instalments.
No, one cannot claim HRA for rent paid for two houses. Let’s take, for example, a person Mr Akhil is residing in a different city from his parents. He is paying rent for himself and his parents as well. But he can claim HRA only on the rented accommodation occupied by him. He cannot claim HRA for the rent paid on the rented accommodation occupied by his parents.
Does the HRA claim include maintenance charges and electricity charges?HRA is paid only to cover the rent of the house. Maintenance charge or electricity charge will not be included in this.
Can I claim HRA without quoting my landlord’s PAN?One requires their landlord’s PAN in case the rent paid exceeds INR 1 lakh per annum. In case the landlord doesn’t have a PAN, then the person has to obtain a declaration from their landlord. The declaration should have the name and address of the landlord.
Can I claim HRA while filing ITR?Yes, one can claim HRA while filing income tax returns (ITR). In case one doesn’t submit the rental agreement and rent receipts to their employer, the TDS deducted will be higher. However, one can claim HRA while filing their income tax returns.
