Understanding House Rent Allowance (HRA) Exemption
Our HRA Calculator helps you determine the tax-exempt portion of your House Rent Allowance and plan your taxes effectively.
What is HRA?
House Rent Allowance (HRA) is a component of salary provided by an employer to an employee to meet the cost of renting accommodation. It is partially or fully exempt from income tax under Section 10(13A) of the Income Tax Act, 1961.
The HRA exemption helps reduce your taxable income, provided you are living in rented accommodation and receiving HRA from your employer.
How HRA Exemption is Calculated
The tax-exempt portion of HRA is the *least* of the following three amounts:
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Actual HRA ReceivedThe actual amount of HRA paid by your employer.
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Rent Paid Annually minus 10% of SalaryThis is calculated as: $(Rent\, Paid\, Annually - 10\% \,of\, (Basic\, Salary + DA + Commission))$
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Percentage of Salary Based on City
- 50% of (Basic Salary + DA + Commission) for those living in Metro cities (Delhi, Mumbai, Kolkata, Chennai).
- 40% of (Basic Salary + DA + Commission) for those living in Non-Metro cities.
**Note:** "Salary" for HRA calculation purposes typically includes Basic Salary, Dearness Allowance (if it forms part of retirement benefits), and any commission based on a fixed percentage of turnover achieved by the employee. It excludes all other allowances and perquisites.
Conditions for HRA Exemption
To claim HRA exemption, you must meet certain conditions:
- You must be a salaried individual receiving HRA as part of your salary.
- You must be residing in rented accommodation.
- You must actually pay rent for the accommodation.
- You cannot claim HRA exemption if you live in your own house or do not pay rent.
- If the annual rent paid exceeds ₹1,00,000, you must provide the landlord's PAN details to your employer.