How to calculate my House Rent Allowance (HRA)?
Time needed: 15 minutes.
Here are 4 easy steps to calculate how much Tax exemption you can apply for House Rent in India
- Get the HRA component paid by your employer
Check your salary slip for what is the House Rent Allowance (HRA) they are paying you per year
- Calculate the actual rent you pay your landlord
- Calculate 40% or 50% of your Basic Salary
Calculate 40% of your Basic Salary+Dearness Allowance(if you are a Government employee receiving DA). If you are living in a Metro city such as Chennai, Delhi, Mumbai or Kolkota then this will be 50% of your Basic Salary+DA
- The lowest amount from the three figures above is your HRA limit
Now, from the three figures you get from steps 1, 2 and 3, the lowest amount will be your HRA for the Financial Year.
Questions on House Rent Allowance, HRA and Tax on Home Rent
House Rent Allowance (HRA) is a benefit provided for people who earn salary to claim a Tax exemption on the rent they pay. Covered under Section 80GG of the Income Tax Act, this outlines the various ways an employee paying rent can claim a tax break on it.
Yes, House Rent is eligible for tax exemption under Section 80GG of the Indian Income Tax act.
The lowest amount among the following will be considered as your eligible HRA
1.) HRA given by your Employer
2.) Rent you pay in the financial year – 10% of your Basic salary
3.) 40% of your Basic Salary (Basic Salary + Dearness Allowance if you are getting DA) (Make it 50% if you are living in a Metro city)
HRA can be 40% of Basic salary and this is increased to 50% of Basic salary if you are living in a city classified as a Metro (Delhi, Chennai, Kolkata and Mumbai)
India has 4 Metro cities as of now. Delhi, Mumbai, Kolkata and Chennai.
For Government and Defence staff, the Dearness Allowance received will be included with the Basic Salary in calculating the eligible HRA. So for Government of India employees Basic salary + Dearness allowance * 40% (50% if living in a metro) will be an eligible HRA exemption. Between HRA Received, Actual HRA and this, the lowest will become the final House Rent allowance that can be claimed.
No, HRA is only for those who are living in a rented house. You can’t claim HRA if you are living in your own house.
No, HRA is only for those who are living in a rented house. You can’t claim HRA if you are living with your parents in their house. However, you can enter into a legal agreement with your parent’s and start paying them a monthly rent. This can be considered as a valid rent and for your HRA.
Yes, if your own house under loan is in one city and you are living in another city, you can claim HRA and also Interest on Home Loan
The IT department sent out a circular on 10th October 2013 (Circular No. 8/2013), making it mandatory for all who pay over Rs.1,00,000 (1 Lakh) or more per year as rent, to provide the landlord’s PAN number. That is, if you claim more than Rs.8,333 as rent per month, PAN of the landlord is mandatory.