Apart from the basic necessities of food and clothing, shelter is a major expense everyone must bear. If you don’t own your own house, you pay monthly rentals for a shelter. When you work for any organization, your employer will pay you HRA or House Rent Allowance as part of your salary package. You can claim a deduction of this HRA amount from your salary to reduce your tax burden based on specific rules. There are calculators available on the internet that can help you determine the HRA tax exemptions and HRA calculator rules laid out by the IT department.

IT Rules for Computing HRA Tax Exemptions

The rules for computing HRA tax exemptions are available under section 10 (13A) of the IT Act. According to section 10 (13A), this tax exemption of HRA is only available for persons earning a salary. The salary must contain the HRA component as part of the pay package. As per this section, the lowest value of the following rules is applicable for tax exemptions even when you use an HRA calculator online:

• The actual amount of house rent allowance you get as part of your salary or
• The actual rent that you pay minus 10% of the salary you receive; or
• 50% of the salary if you are residing in a metro city or
• 40% of the salary if you are residing in a non-metro city

Example of Computing HRA Tax Exemption

Let’s say you are staying in a metro city like Delhi, and in your job, you are earning INR 1 lakh as a salary. The house in which you reside has a monthly rent of INR 45,000, and the HRA you get as part of your salary is INR 40,000.

Then, use the HRA calculation formula as per the above rules.

The actual house rent allowance you get as part of your salary = INR 40,000

The actual rent amount you pay every month – 10% of your salary = INR 45,0000 – (10 / 100 X INR 1,00,000) = INR 45,000 – INR 10,000 = INR 35,000

Since you are residing in a metro city, 50% of your salary = 50 / 100 X INR 10,00,000 = INR 50,000

Thus, as per the HRA calculation for tax exemption, the lowest value of the above three calculations can get reduced from your taxable income, which is INR 35,000. The remaining INR 5,000 out of the actual rent you pay every month will be taxable as per the IT laws.

Other Points to Consider for HRA Tax Exemption Claims

Keep these additional points in mind while claiming HRA tax exemptions:

• As per the IT law, you cannot claim more than 50% of your salary as tax exemptions.
• HRA calculation for income tax exemptions has to follow the above-mentioned IT rules, and the lowest value is permissible for tax deductions from your taxable salary.
• If the rent you are paying for the residence is above INR 1 lakh, then you will have to present the PAN details of the property owner to claim HRA tax exemptions.
• You can claim HRA tax exemptions even if you claim tax benefits for a home loan repayment.
• When you stay with your parents, HRA deduction calculation is still possible if you pay online rent to them and take a receipt.

Documents to Submit for Claiming HRA Tax Exemption

The following are the documents that you must submit to claim HRA tax exemptions:

• Monthly Rental Receipts with the date, your name, landlord’s name, address of the rental house, tenancy duration, and signature of the landlord across a revenue stamp
• A copy of the rental agreement
• PAN details of the landlord with a copy of the PAN card if your rent is greater than INR 1 lakh

Understanding an HRA Calculator

An HRA calculator assists you in easily computing the HRA exemption amount and the amount of rent that is taxable using the IT rules of HRA calculation. This calculator is available online on the IT department’s website or other financial firms’ web portals. The various fields of this calculator, according to the one available on the IT department’s website, are as follows:

Basic Salary: On your salary slip, you will find this component mentioned as a part of your salary structure.

DA or Dearness Allowance: This allowance is another component that forms a part of your salary structure and is necessary for a house rent allowance calculator.

Commission: If your salary has any commission you receive as part of your salary structure, then that amount or percentage.

HRA Received: The actual house rent allowance that you receive as part of your salary structure.

Rent Paid: This field requires the actual rent you pay for the rented house.

Check Box: Whether you reside in a metro or a non-metro city will decide if you will check the box yes or leave it unchecked if no.

Exempted House Rent Allowance: When you click the Calculate button of the HRA calculator income tax department, this field displays the HRA tax exemption amount you can reduce from your taxable income.

Taxable House Rent Allowance: In this field, you can see the amount of the house rent allowance that is taxable according to IT laws.

HRA Tax Exemption Calculator Benefits

Here are some benefits of using this online calculator:

• It helps you to save much of your precious time as it does the necessary labor of computation, and you won’t have to do it manually.
• The HRA exemption calculator will give you both the deductible and taxable amounts, making tax planning convenient.
• This online calculator is readily available; you can use it anywhere or access it anytime on the internet.

Conclusion

The availability of this calculator online has made life so much easier for computing taxes. It lets you know how much of the HRA is taxable and how much you can deduct from your income to pay fewer taxes. The HRA calculator rules are per section 10 (13A) of the IT Act, which states how to determine the HRA tax exemptions. Use it to compute your taxes; it is simple to use, and you can plan your taxes better.