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HRA Exemption Calculator

HRA stands for "House Rent Allowance." This is a component of the monthly salary employees receive. And it is eligible for tax exemptions based on certain criteria.  Different sections of the Income Tax Act manage this aspect. Getting the most of it helps professionals reduce their expenses and streamline their budgets.

HRA is the allowance employees receive when staying in rented accommodations. The amount may vary based on the agreement between the employer and the employed. To receive it, the employee must reside in an apartment that he/she does not own. And one can use an HRA exemption calculator or HRA calculator online to determine the amount one can receive in this regard.

What is the HRA Exemption Calculator?

Section 10-13A of the Income Tax Act deals with the HRA tax exemption for the salaried. The exemption is the lowest among the following:

  • The rent the employer provides
  • 50% of the salary is eligible for the HRA tax exemption if the person lives in a metropolitan city
  • It is 40% if the employee resides in any other city
  • It is 10% of the rent the employee pays every month

Salary, in this regard, may comprise the basic remuneration, dearness allowance, and additional commissions.

Evaluating the same on your own may appear daunting. The best option is to use an HRA exemption calculator or HRA calculator online.

HRA tax exemption for the self-employed

The self-employed, too, are eligible for this. They can use Section 80 GG for the purpose. This is the same the salaried use to claim HRA exemption if they don't receive the employer-provided HRA.

Why should you choose HRA Exemption Calculator?

If the rent a professional pay exceeds INR100000, the person can claim HRA tax exemption. But for this to happen, the professional needs to furnish the PAN details of the landlord. He/she should also submit the receipts of the rent along with them.

Employees can even claim tax exemption both for a home loan and the rented place where they reside. For that, the employee's home should be rented to someone. And the person should be living in a rented place. The submission for exemption should have information on the income received from the home. The person should also pay the required tax for it. Remember, no HRA tax exemption is available if the mortgaged home and the rented place are in the same region. To avail tax exemption, the professional has to prove that both are located far away.  The person should not be in a position to travel to the workplace from home. It can be easily calculated using the HRA calculation formula.

Documents Required for Applying Tax Exemption:

An employee needs the following documents:

  • The landlord's PAN details and copy of the property order
  • Receipts of the rent being paid
  • Photo-copies of the rent-agreement if required

An employee can even pay the rent of the apartment for his or her father. The person can then claim any HRA tax exemption for the same.

Employees can claim HRA tax exemption even if their employer refuses to pay HRA.  This, they can do, when filing their ITR. Such a person receives the exempted money as a refund of the excess TDS.

A situation when two or more family-members pay rent:

If both the employee and her husband are earning, they too can claim HRA tax exemption. They should be paying rent for separate apartments. And they should be able to submit separate receipts. If both stay in a single apartment, only one can pay tax exemption. 

Employees can manually calculate their HRA tax exemptions using the HRA calculation formula or use other aids like the HRA calculator online.

Eligibility Criteria:

To receive HRA tax exemption benefit, the employee should fulfil the following conditions:

  • The employee has to pay the rent. It is not available during the period the person has not paid the rent
  • The amount available varies based on the changes in rent, job position, and the location
  • The employee can even claim the HRA tax exemption if the rent is paid for someone other than his/her father. The person has to make sure that the rent is done through bank transfer. This makes it easier for the IT department to calculate the expenses using the HRA exemption calculator or the HRA calculator online or to resort to manual methods using the HRA calculation formula

Features and Benefits:

Section 80GG of the IT offers this tax benefit for the expenses as part of the rent. However, it is available to only those employees who have not claimed an exemption for anything else. As mentioned above, this allows those who don't avail HRA to claim tax exemption for paying rent. There are also certain other conditions. They include the following:

  • Only members of the HUF can avail of this benefit
  • The beneficiaries must not be enjoying tax-exemption under Section 10-13A
  • The HUF to which the employee should not own the accommodation
  • Beneficiaries are not eligible for tax-exemption for self-occupied properties in any other location
  • Those availing the benefit should submit a declaration in Form 10-BA. This should attest to the fact that the person fulfils all requirements
  • The real tax-benefits are available under Section 80GG of the income tax
  • The tax relief available here is 10% of the salary or the income. The next range is 25%.  This implies that 10-25% of the rent is available as an HRA tax exemption

How to Claim HRA Tax Exemption:

If the employee files the ITR on its official website, the HRA tax exemption amount will be printed therein. Applicants are required to double-check the amount with the documents mentioned in Section B of Form-16. If you want to avoid the pre-filled form, you can copy-paste the information from the required documents.

Employees can calculate HRA exemption manually, as mentioned above, by using the HRA calculator online. There are also an HRA exemption calculator or HRA calculator online tools and apps. Do what works best in your schedule.

Upon calculation, you should report the same in your ITR report. Choose your form with care. The wrong choice may result in your submission being deemed as defective. And you will have to repeat the process.

Claiming the HRA tax exemption is now a breeze. Copy the details from Form-16 and paste it in ITR-1. Unlike previous years, this year's ITR1 works in conjunction with Form-16. This is a TDS certificate employees receive from their employers. As mentioned above, you can just copy the required information from the same to ITR1. But for this, one has to submit the rent agreement and other documents to the employer. The employee can claim tax exemption even if he has not submitted the required documents. But in such a scenario, the person will have to calculate the tax-exempted amount from HRA on his/her own with the aid of the HRA calculation formula.

In such an instance, the portion of HRA in your Form 16 of your salary will be indicated as fully taxable. If this happens, the taxable amount in your salary in Form 16 will be higher than the amount you calculated using the HRA calculator online. It can also be done manually using the HRA calculation formula.

The first step toward claiming the HRA tax exemption is calculating your HRA allowance. You may even search for an HRA calculator online. The Internet is filled with such tools. One could also calculate it manually using the HRA calculation formula. However, given below is a brief overview of the same:

An employee's salary determines his/her HRA. It is the lowest among the following:

  • The HRA in his/her salary
  • 50% of basic salary if he lives in any of the four metropolitan cities
  • 40% in all the other cities
  • The actual rent below 10% of the salary

The following table illustrates the calculation using the HRA exemption calculator or HRA calculator online.

Basic salary INR30000
HRA INR13000
Conveyor allowance INR2000
Special allowance INR3000
Leave travel allowance INR5000
Total earning INR53000

INR 2200 gets deducted from his salary as provident fund contribution and tax respectively every month. In this instance, the person's HRA exemption is the lowest among the factors given in the table annually:

The HRA component of the salary 13000*12=INR156000
50% of his basic salary; he stays in a metropolitan city 50%*INR30000*12= INR180000
Actual rent paid minus 10% of basic salary (INR10,000 * 12) - (10% * INR30,000 * 12) = INR1200000 – INR36,000 = INR84,000

INR 84000, as you see, is the lowest value here. And the person can claim the HRA tax exemption for this amount. The rest of the HRA will be taxed depending on his income.

As seen above, it is very simple to calculate the HRA tax exemptions using the HRA calculator online or by resorting to the manual method using the HRA calculation formula.

Renewal Process:

  1. If you have submitted the rent agreement and other details

    If you have submitted the rent agreement, your Form 16 will display the tax-exempted amount. Your entire HRA may be tax-exempted. It can also be a portion of the same. It depends on the conditions being outlined for the purpose.

    Do not forget to submit the PAN number of your landlord when submitting the rent agreement to the employer. This applies only to those whose rent exceeds 100000. The taxable portion of The HRA exemption found using the HRA exemption calculator gets added to section 17(1) under the employee's head Gross Salary. The tax-deducted portion will be displayed separately; under the head Allowances to the extent exempt under section 10.

  2. If the employee forgets to submit the rent agreement

    If the employee fails to submit the rent agreement, he needs to calculate the HRA exemption using the HRA calculator online or by resorting to the manual method using the HRA calculation formula. The reporting will remain the same with just one difference. The person will have to deduct the tax-exempt HRA manually from the head salary as per section 17 of the Income Tax Act.

    You are not required to submit any document when submitting ITR. However, the Department may ask you for proofs of the HRA exemption when verifying your submission. If you pay rent for your parents, make the transactions through your bank. This makes verification easy.

  3. Claiming HRA exemption when living with your parents

    Employees can claim for HRA exemption even if they live with their parents. All they have to do is to reach a rent agreement with their parents. They should transfer a fixed amount to their accounts every month.  This lets you do well and earn at the same time. Their parents, in the meantime, should show the rent they receive in their ITR submission.

  4. Date of ITR submission and claiming HRA exemption:

    The last date for filing the ITR and claiming HRA exemption is July 21 of that financial year. This applies to those whose income doesn't need any audit. If the income needs auditing, the last date of submitting ITR is September 30.

Current vs. New Tax Regime:

This is a question that is sure to confuse both the salaried and the self-employed alike. When choosing one, remember the proverb; "be careful what you wish for, there is always a catch."

Budget 2020 promises numerous tax-exemptions. But there is a catch; there are no deductions. It has also removed the tax-exemptions that were available at the time. The Finance Minister also gave an option for tax-payers to choose between the current and the new tax regimes.

  1. Current tax regime

    • The current tax regime imposes higher taxes. But it offers numerous exemptions. There are up to 70 options and deductions where one can save huge
    • Exemptions are parts of one's salary, like HRA. Deductions, on the other hand, lets one lower taxes while spending on specific items. The largest option that lets you minimize tax here is Section 80 C. It helps you save up to INR100000. There are also other options like tax-exemption on the home loan
  2. The new tax regime

    • The new tax regime offers more slabs and lower taxes. However, it does not offer any tax-exemptions. The lowering of tax rates works in the range of INR1500000. To be exact, INR 5-7 lakhs slab will have a tax of 10%. The slab in 7-10 lakhs will have a tax of 15%
    • In the old tax regime, the slab above 10 lakh had a flat tax rate of 30%. At present, it is divided into three.  The tax rate for INR10-12.5 lakhs is now 20%. The same is 25% for INR12.5-15 lakhs. It is 30% for INR15 lakh and above
    • There exists no simple answer to the question; current vs. new tax regime, which one to choose. One has to calculate deductions and exemptions from the actual salary using the HRA exemption calculator or HRA calculation formula with the aid of the HRA calculator online. Done this, calculate what it will look like if you forego all deductions. The result should be the answer that should guide your decisions in this regard

FAQ's

  • Q: Who can apply for HRA tax exemptions?

    Ans: HRA is the allowance employees receive when staying in rented accommodations. The amount may vary based on the agreement between the employer and the employed. To receive it, the employee must reside in an apartment that he/she does not own. And one can use an HRA exemption calculator to determine the amount one can receive in this regard.
  • Q: What is the procedure to apply for the HRA tax exemption if the person has submitted the rent agreement and other important details?

    Ans: If you have submitted the rent agreement, your Form 16 will display the tax-exempted amount. Your entire HRA may be tax-exempted. It can also be a portion of the same. It depends on the conditions being outlined for the purpose. Do not forget to submit the PAN number of your landlord when submitting the rent agreement to the employer. This applies only to those whose rent exceeds 100000. The taxable portion of The HRA exemption found using the HRA exemption calculator gets added to section 17(1) under the employee's head Gross Salary. The tax-deducted portion will be displayed separately; under the head Allowances to the extent exempt under section 10. It is also possible for the employees to calculate their HRA tax exemptions using the HRA calculation formula.
  • Q: How much will an employee receive through HRA tax exemptions?

    Ans: The lowest amount among the following will be provided to the employee as calculated using the HRA calculation formula:
    • The rent the employer provides
    • 50% of the salary is eligible for the HRA tax exemption if the person lives in a metropolitan city
    • It is 40% if the employee resides in any other city.
    • It is 10% of the rent the employee pays every month

    Salary, in this regard, may comprise the basic remuneration, dearness allowance, and additional commissions.

    Evaluating the same on your own may appear daunting. The best option is to use an HRA exemption calculator online.

  • Q: Can an employee claim HRA tax exemptions if he/she lives with their parents?

    Ans: Yes, the employee can claim for HRA exemption even if they live with their parents. All they have to do is to reach a rent agreement with their parents.
  • Q: How can one easily apply for HRA tax exemptions?

    Ans: Claiming the HRA tax exemption is now a breeze. Copy the details from Form-16 and paste it in ITR-1. If the employee files the ITR on its official website, the HRA tax exemption amount will be printed therein. Applicants are required to double-check the amount with the documents mentioned in Section B of Form-16. If you want to avoid the pre-filled form, you can copy-paste the information from the required documents. It is also possible for the employees to calculate their HRA tax exemptions using the HRA calculator online or by resorting to the manual method using the HRA calculation formula.

    Employees can calculate HRA exemption manually, as mentioned above, by using the HRA calculator online. There are also HRA exemption calculator tools and apps. Do what works best in your schedule.

    Upon calculation, you should report the same in your ITR report.

  • Q: What is the procedure for applying for the HRA tax exemption if the employee forgets to submit the rent agreement and other important details?

    Ans: If the employee fails to submit the rent agreement, he needs to calculate the HRA exemption manually by using the HRA calculation formula. The reporting will remain the same with just one difference. The person will have to deduct the tax-exempt HRA manually from the head salary as per section 17' of the Income Act.

    You are not required to submit any document when submitting ITR. However, the Department may ask you for proofs of the HRA exemption when verifying your submission.

    If you pay rent for your parents, make the transactions through your bank. This makes verification easy.

  • Q: What amount of tax relief is provided to the employees?

    Ans: The real tax-benefits are available under Section 80GG of the income tax. The tax relief available here is 10% of the salary or the income. The next range is 25%.  This implies that 10-25% of the rent is available as an HRA tax exemption.
  • Q: Can an employee apply for tax deductions even if he/she hasn't submitted the required documents?

    Ans: Yes, they can. The employee can claim tax exemption even if he/she has not submitted the required documents. But in such a scenario, the person will have to calculate the tax-exempted amount from HRA on his/her own with the aid of the HRA calculation formula.
Written By: Paisawiki - Updated: 12 April 2021