POSTED BY August 16, 2017 COMMENTS (14)ON
Do you get HRA as part your salary? If yes, then it’s critical for you to understand how the HRA exemption amount is calculated?
In this article, we will talk about things like what is HRA? How to calculate HRA? And various other things related to house rent allowance. You can check out the video below to quickly understand everything about HRA
HRA i.e. House Rent Allowance is the amount paid as a part of salary by the employer to the employee. Employee can get tax benefit on this HRA amount if he is living in rented house and paying rent. This simply means that if your salary skip has HRA component, then you don’t have to pay income tax on this amount. However you can’t save income tax on the full amount.
There is a rule on how much HRA you can claim and save tax on it. In this article, we will look at the rules and calculations. But before we move ahead, here is one good news.
If an employee does get HRA as part his salary, but paying rent, even then he/she can claim some part of HRA for saving tax and there is separate calculation for that. We will also look at that today.
How to Calculate HRA amount?
Lets now see how the HRA is calculated, but the calculation depends whether you are getting salary component from your employer or not (it should be mentioned in your salary slip).
Actual HRA offered will be the lowest of the following 3 things:
Let’s take an example of how HRA is calculated.
Example: An employee who lives in a metro city, has basic salary Rs.30,000 per month and the HRA part is Rs.15,000. The actual rent he pays is Rs.10000 per month. Then the exemption he will get is –
Now the lowest amount in above calculation is 84,000. So the employee will get exemption of Rs.84,000.
If you are living in a rental house or paying for your accommodation and do not get HRA from your employer then also you are applicable for the tax deduction in income tax return. These people can also claim for HRA exemption under section 80(GG) of IT act.
Actual HRA offered will be the lowest of the following 3 provisions:
Though there are some conditions which should be fulfilled if you want tax deduction in this case. The criteria are as bellow:
If you do not meet any of the above criteria then you can’t claim for HRA. Here is chart which explains the same thing which we talked above.Important points regarding HRA?
The first thing you need to know is that you don’t need to submit anything to Income tax department to claim HRA. You only need to submit the documents to your employer and your employer will verify documents and give you the exemption and then issue form 16 and include these details in that form.
If there is any enquiry by the income tax department, only in that case you need to present further documents asked by them.
So basically at the start of the year, you need to update your employer on the rent you are paying each month and based on that data the employer will deduct the TDS from your salary. Finally at the end of the year, you will have to submit following documents
Also, In last few years, many tax payers were found submitting fake documents for HRA claim in many cases. This is the reason that IT department is asking for more and document while claiming for HRA exemption. If there is any scrutiny by income tax department, you might have to submit some more documents like
Some cases when charges of IT department can make enquiry are
We have created a nice HRA calculator and analysis tool, which will help you to calculate your HRA and also help you know how much HRA are you not able to utilize and how much is it covering your rent paid.
If you look at the same example which is mentioned above in this article (salary = Rs 30,000 per month, HRA = Rs 15,000 per month, and Rent paid = Rs 10,000 per month, and living in metro) and if you do the HRA analysis , you will find out two things
Here is a snapshot of our HRA calculator
Click here to download HRA calculator
If you have bought a house in a different city and you are doing job in different city, then in that case, you can claim HRA benefits as well as home loan interest too. However if you have the house in the same city of your job, you cannot claim the HRA benefits.
Housing.com has explained it in a nice way.
Are you claiming HRA tax benefits? Do you follow any other process which is not part of this article? Can you share some more HRA related tricks which you have learned over part few years?
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14 replies on this article “How much HRA can you claim? (with calculator and video explanation)”
Really a very important topic every tax payer should know. You explained it nicely and it will be helpful for may. Surely I will share this to my clients. The calculator you provided will help to calculate independently. The higher tax slab people will come to know why they can’t claim full HRA for tax exemption. Thanks for the timely information. Best wishes and expecting more information like this in future.
Thanks for your comment K.I.Korah CFGP® , ARN -57458, BABLI Fin Tech. Kerala
Though I pay more than 1 lakh a yr….my owner simply skipped stating thy don’t own a pan card as thy reside in different country(Aus)…so to get the exemption?
You can get HRA exemption if your landlord is not providing his PAN. But still you can claim it while filing tax return.
I have own house in pune and housing loan is going on.
currently i am leaving in mumbai on rent so shall i claim both exemption ( housing loan plus hra)?
Hi nikhil b
Yes you can claim for both because your own house and rented house are in different cities.
Good Article with simple & easy understanding.
If anyone stays with shared Rent in one flat, How he/she can take HRA exemption? What are documents needed?
Yes, as per section 10(13A) you can claim for HRA deduction. You have to provide your rent agreement for that.
Crisp and simple form for any layman to understand. The calculator is another level of convenient. Thanks much for sharing this, very helpful!
Welcome ! please share more and more !
‘Some employers may ask for leave and license agreement’
I guess it should be – Some employers may ask for ‘lease’ and license agreement (typo error – ‘leave’)
Hi Rajesh Mac
Thanks or update
Lucid article and very good calculator. Very easy for even a layman to understand the concept & process to use the calculator.
Thanks for sharing that 🙂
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